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Thursday, June 19, 2014

Camlin Fine Sciences: 8-Bagger Stock - ROI @ 750% in 3 Years

Dear Saral Gyan Reader,

Our equity analysts published Hidden Gem - March 2011 research report on Camlin Fine Chemicals (BSE Code: 532834) and shared it with all Hidden Gems members. Research report was published 3 years back on 27th Mar'11 and Buy was recommended on Camlin Fine Chemicals Ltd at price of Rs. 60 (adjusted stock split price - Rs. 12). Today, Camlin Fine Chemicals is a 8-Bagger stock for our Hidden Gems members giving whopping returns of 750% in last 3 years.

We recommended Buy on Camlin Fine Chemicals (now Camlin Fine Sciences) at price of Rs. 60 (adjusted stock split price - Rs. 12) for target of Rs. 145 with time period of 18-24 months. After 8 months of our recommendation, stock has made 52 week high of Rs. 152.30 and closed at Rs. 144.10 giving absolute returns of 138% to our Hidden Gems subscribers. We recommended our Hidden Gems subscribers to book profits partially by selling 50% of their holding and keeping rest for long term. Once you  book profits of more than 100% by selling half of your shares, you can hold remaining 50% shares at no cost!

Today, Camlin Fine Sciences has made all time high of  Rs. 106.55 and currently tradiing at Rs. 102 giving whopping returns of 750%. Company has declared its 4th quarter results on 29th May'14. 
Net profit of Camlin Fine Sciences declined 16.26% to Rs 3.40 crore in the quarter ended March 2014 as against Rs 4.06 crore during the previous quarter ended March 2013. However, sales rose 36.34% to Rs 110.60 crore in the quarter ended March 2014 as against Rs 81.12 crore during the previous quarter ended March 2013. 

For the full year,net profit rose 28.52% to Rs 18.97 crore in the year ended March 2014 as against Rs 14.76 crore during the previous year ended March 2013. Sales rose 19.40% to Rs 374.25 crore in the year ended March 2014 as against Rs 313.45 crore during the previous year ended March 2013. We advice all our members to continue holding Camlin Fine Sciences in their portfolio.

Note: Its important to diversify your small cap stock portfolio, you can't just bet on one or two stocks. Our objective is to protect & grow your capital giving 100% to identify best of Hidden Gems but we do not guarantee similar returns from all our recommendations. Few of our Hidden Gems can perform better in a lesser span of time, few may take more time and need to hold for longer period. 
  
Below is the summary of Camlin Fine Sciences Ltd published in our Hidden Gem research report - Mar'11.

1. Company Background

Camlin Fine Chemicals Ltd is one of the India's leading manufacturers and exporters of Bulk Drugs, Fine Chemicals and Food Grade products. The company manufactures active pharmaceutical ingredients (API's), food antioxidants and sweeteners. They operate in two business divisions, namely Food Ingredients Division and Industrial products Division. The company's products have applications in processed foods, edible oils, paints, polymers, alternative fuels (biodiesel), rubber, health, and pharmaceuticals.

The company has a strong research and development which is focused on bringing in continual improvements on process and products, backward integration and developing innovative products. The research and development is equipped with comprehensive and updated instrumentation for conducting quality analysis, stability studies. The research and development also is equipped to conduct application studies on stability index of edible oils and Bio-diesel. Camlin Fine Chemicals Ltd was originally incorporated on November 30, 1993 as a private limited company with the name of Camlicon Consultants Pvt Ltd. In April 2006, the main object of the company was altered to enable the company to pursue business in Fine Chemicals.

They launched a new product namely, 'Sucralose' which is a synthetic sweetener with large demand and attractive price. In June 1, 2006, the name of the company was changed from Camlicon Consultants Pvt Ltd to Camlin Fine Chemicals Pvt Ltd. As per the scheme of arrangement, the fine chemicals division of Camlin Ltd was de-merged and transferred to the company with effect from July 01, 2006. In August 11, 2006, the company was converted into public limited company and the name was changed to Camlin Fine Chemicals Pvt Ltd. The company entered into a joint venture with Viachem LLC USA on 51:49 basis and set up a company namely, Dulcette Technologies LLC for marketing Sucralose, Aspartame and Acesulfame-K and their blends in USA, Canada and Mexico. In March 30, 2007, the equity shares of the company were listed on the Bombay Stock Exchange (BSE). During the year 2007-08, the company increased the production capacity of Chemical & Chemical Products from 1,636 Ltrs/Kgs to 2,476 Ltrs/Kgs.

The company acquired the control of Sangam Laboratories Ltd by acquiring 60% of the paid up equity share capital of the company. They invested Rs. 5 lakh for controlling interest in the Equity Share Capital of Chemolutions Chemicals Ltd. In February 2008, the company entered into a joint venture agreement with Advanced Aerospace Technologies Inc., USA' to manufacture and market speciality fine chemicals primarily to cater to European and U.S markets. During the year 2008-09, the company expanded the production capacity of Chemical & Chemical Products from 2,476 Ltrs/Kgs to 2,548 Ltrs/Kgs. The company invested Rs. 25.50 lakh in Fine Lifestyle Brands Ltd and Rs.5.10 lakh in Fine Renewable Energy Ltd, which represents 51% of equity share capital of each of them. They further invested Rs. 92.32 lakh in the share capital of their present subsidiaries, namely Sangam Laboratories Ltd, Chemolutions Chemicals Ltd and Dulcette Technologies LLC, USA. During the year 2009-10, the company expanded the production capacity of Chemical & Chemical Products from 2,458 Ltrs/Kgs to 3,500 Ltrs/Kgs. They are entering the field of Bio technology products and first patented, biotechnology based Natural shelf life enhancing formula for increasing shelf life of Natural farm produce, like fruits, vegetables and flowers. The company decided to merge Sangam Laboratories Ltd, a wholly owned subsidiary with the company. 

Camlin the corporate group was established in 1931 and is a pioneer in art & stationery material in India. Camlin diversified into Pharmaceuticals and Fine Chemicals two decades ago. Today Camlin Fine Chemicals is the world's second largest manufacturer and marketer of food grade antioxidants TBHQ and BHA. Company facilities are HACCP and ISO 9001 : 2000 certified.

Products

Company range of products includes

A] FOOD INGREDIENTS 
i) Antox TBHQ (HACCP Certified) FCC V / FAO / WHO (Tertiary Butyl Hydroquinone) 
ii) Antox BHA (HACCP Certified) FCC V / FAO / WHO / EEC ( Butyl Hydroxy Anisole) 

B} SWEETENER
i) Sucralose FCC V

C} ACTIVE PHARMACEUTICAL INGREDIENTS
i) Miconazole Nitrate B.P. / USP
ii) Clotrimazole B.P. / USP
iii) Amlodipine Besilate E.P
iv) Amlodipine Salts
v) Advance intermediate of Amlodipine
vi) Intermediate of Miconazole Nitrate

Research & Development

Camlin Fine Chemicals Ltd has a strong research and development which is focused on bringing in continual improvements on process and products, backward integration and developing innovative products.

The research and development is equipped with comprehensive and updated instrumentation for conducting quality analysis, stability studies. It is equipped to conduct application studies on stability index of edible oils and Biodiesel.

The kilo lab facility is installed in the laboratory to bridge the gap between laboratory and pilot plant. The pilot plant at Tarapur is designed for scale up and development of new products and processes, as well as commercial manufacture to support small volume requirement of customers.

The R& D specializes in synthesis of basic molecules for drug development, synthesis of high quality laboratory chemicals, synthesis of drug metabolites.

2. Recent Developments (as on 27th Mar'11)

i) Camlin Fine Chemical Ltd closes deal for acquiring Borregaard – March 09, 2011.

Camlin Fine Chemicals Ltd has closed the deal on March 09, 2011 for acquiring Borregaard, Italy S.p.A.

Borregaard, Italy S.p.A. is one of the five global producers of Hydroquinone, which is the key raw material for the Company's major product, due to the this acquisition the Company shall have assured & steady supply of key raw material which at times remains in short supply in the global market.

ii) Camlin Fine Chemical’s board approves to form a subsidiary company in UAE – November  22, 2010

The board of Camlin Fine Chemicals in its meeting on 22 November 2010 has approved proposal for acquisition of an Italian company manufacturing fine chemicals through its wholly owned subsidiary to be set up in Mauritius. The board also approved formation of subsidiary company in UAE for facilitating its business through Middle East

iii) Camlin Fine Chemical’s board approves scheme of merger  -  October 11, 2010

The board of Camlin Fine Chemicals in its meeting on 11 October 2010 has approved the merger of Sangam Laboratories, a wholly owned subsidiary with the company subject to all necessary statutory approvals

3. Key Concerns / Risks (as on 27th Mar'11)

The performance and profitability of our products depend on the petroleum prices as they directly affect the overall costs and realizations, considering the current petroleum pricing fluctuations which have only seen an upward movement.

Competition from China and other Indian manufacturers which can put price pressure and impact the company’s global business.

Any economic downturn / recession or unforeseen events like terrorist attacks, floods can dampen sales.

4. Saral Gyan Recommendation (as on 27th Mar'11)

i) Camlin Fine Chemicals has steadily increased its sales and market share in previous years and its turnover improved from Rs. 470 million in 2006-2007 to Rs. 1250 million in 2009-2010. Bottom line improved from a loss of Rs. 20 million to a profit of Rs. 43 million in this period.

ii) Currently, Camlin Fine Chemicals is trading with a P/E multiple of 9. The parent company, Camlin ltd with FV Rs. 1 is trading with a  P/E multiple of 24 which is positive for Camlin Fine Chemicals ltd.

iii) Recently acquired subsidiary of Borregaard will help Camlin Fine Chemicals in realizing better operating and profit margins in coming quarters. This acquisition will ensure the easy availability of raw material Hydroquinone manufactured by Borregaard for Camlin Fine Chemicals ltd.

iv) Company has introduced new products and continuously strengthening its marketing activities throughout Europe and USA.    

v) At current market price of Rs 60.50, dividend yield works out to be 2.21%. On equity of Rs. 93.03 million the estimated annualized EPS works out to Rs. 15 and the Book value per share is Rs. 45.85. At a CMP of Rs. 60.50, stock price to book value is 1.32. Currently, the scrip is trading at 4 X FY 2011-12 estimated earnings which make it an attractive buy at current market price.

Saral Gyan Team recommends “BUY” for Camlin Fine Chemicals Ltd. for a target price of Rs. 145 over a period of 18-24 months.

Click here to read/download Camlin Fine Chemicals Ltd (Hidden Gem - Mar 2011) research report. 

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Team - Saral Gyan