@vskr63

As of now I do not see any bullish chart formations in PEL. The technical set up also is not too encouraging, the stock price being well below 200 dema in the midst of a strong rally in overall markets…

@Surender I do not track Novartis. Its leading products are well known but in pharma business, which is highly fragmented in India, well known brand names does not provide too much of an edge. Another company can come up with a copy cat product at much reduced prices and in India where a large part of patient population is non affording, this fact assumes a lot of significance. You can check prices of tegrital and mazetol both of which contain same molecule. Tegrital is the original molecule but because of very big price difference between it and other clones, doctors would prefer to prescribe cheaper alternatives to provide lower cost drugs to patients.

@Rafi_Syed How to analyse a pharma company is something beyond the scope of this thread. You will have to read up annual reports of companies which give out detailed information. Or else go through relevant pharma threads on VP. I recall @ankitgupta gave a presentation on one of our Goa VP conferences on pharma sector. You can try to locate his presentation and go through it.

@ram1984 I don’t track deepak fertiliser.

@Abhishek_Kumar_9 I haven’t looked at DP wire.

Current P/B - 1.11
PEs gave 8900cr at P/B- 1.05

Now, with RoA only 0.5, the valuation looks expensive, considering many other bans with RoA more than 1 are available for P/B< 1.

In short, that “MARGIN OF SAFETY” is not there.

Notes from NOCIL Q1 FY23 concall:

1. Capacity utilization was 75%. Realization was flat.

2. Expecting 10% volume growth for H1 FY23 (this implies a 0-4% volume growth in Q2 as per my calculations)

3. Optimum capacity utilization target of Sep 23 will get extended by 3 to 6 months due to moderation in demand.

4. Debottlenecking exercise will take 12 months, which will satisfy demand for another 1 to 2 years. Capex for this is very small. How much the capacity will be enhanced due to this is not revealed, but one can take around 10 - 12 % per annum growth and calculate.

5. During the quarter, volume growth was largely from domestic business as there have been changes in the geographical dynamics. Exports are Rs.165 crores for the quarter, lower this quarter but overall, they are increasing for us. Our normal domestic market share is 42-43 %.

6. Following HS Codes for rubber chemicals is misleading as the code may contain several items which we are not manufacturing, and some of our items may be in other HS Codes.

7. Dahej land utilization is around 50-60% and there is scope for brownfield expansion. Navi Mumbai land is almost 100% utilized.

8. In a declining RM pricing scenario, so far delta has been maintained by the players, but need to see how it goes along.

9. From Oct - Nov 20, we have seen a shift in the strategy of Chinese manufacturers. They are adjusting their prices according to the RM price movements (I think what is implied is that there is no rampant dumping by the Chinese players).

10. New capacities are not coming up other than China Sunsine which is already known.

11. Government is now-a-days rejecting most of the anti-dumping duty recommendations.

12. Rubber chemicals global demand is 10.50 lac TPA i.e., 3.5% of global rubber consumption.

13. Anti-dumping duty was Rs.45 crores per annum in FY17 to FY19 . You can exclude that while calculating the EBIDTA margin.

14. One of the key things export customers are looking for is how assured is the supply i.e., commitment to delivery schedules.

15. About 25% revenue is coming from value added / speciality chemicals and we intend to maintain that. In overall scheme if things, this market is may be 5% of the overall market. As against that we are at 25%. So, to grow beyond this will be difficult.

16. Among non-Chinese manufacturers, we are World no 1 when it comes to capacities, all around product portfolio and self-sufficiency of intermediates which is a key aspect in this business. Two major non-Chinese players are - Lanxess which has dependency on China for their intermediates and Eastman (sold to One Rock Capital) which is a single product portfolio.

17. If US removes anti-dumping duty on Chinese rubber chemicals, at the most we may grow slower than at present. But there will be no loss of existing volumes.

18. Some new products are in the pipeline.

19. Europe demand is 12 % of the world market and supply is 15% for Europe incorporated entities. Europe production may be around 10% (just a guess).

Disc: Invested.

So finally the dividend policy. Its an year too late but hopefully they giveaway a good chunk of it. Don’t want a low ball dividend to please the shareholders. I don’t really see any CG issues since the management started getting good people on board, but 35% cash in hand has been my biggest Red flag.

Disc - Invested, 3% off PF

Excellent results.

All positive but few negative points in the presentation :

"IPA sales volumes decreased by 42% y-o-y in Q1 mainly due to raw water
shortage and inability to pass through the rising cost of propylene raw
material and fuel. " IPA business once in lime light during COVID period is now below breakeven…

“Demand and pricing for all grades of Nitric Acid are relatively subdued as it is typically expected during the monsoon season.”
Q2 results are expected to be muted…

“In Q1 FY23, TAN Business achieved a capacity utilization of 111%. Volumes were supported by continued demand from Coal as reflected in Coal India’s and SCCL’s OB performance”
Tan business seems to be at peak volume with no capacity left for further volume growth, further TAN demand is muted in monsoon season becasue of lower mining activity…

There is an element of cyclicality in the business and Q1 apparently seems to be at peak performacne.