Vipul Organics
Business is dealing with several macro headwinds at the same time,
- Logistics costs gone up after covid, these cost coming down, yet 3x pre-covid rates
- Energy cost gone up after Ukraine war
- Dye market is down, very weak demand in domestic market
- Demand collapsed in China due zero covid tolerance policy of their gov.
- Energy crisis in EU zone
Management team has been very capable to handle and grow business in this trying times, hat’s off to them.
What’s happening –
China’s own domestic demand has collapsed due to zero covid policy of their gov., US and EU don’t want to increased chines imports so they have placed ADD, So huge chines capacities dumping wherever they can, so right now they are dumping heavily in Asia & middle east, that is the reason Indian manufacturers are running at reduced volume & lower margin’s.
This is a temp situation and margin’s will be back with china domestic demand improve, this is a matter of few months or Qtrs.
With high energy cost in EU, demand for discretionary products will go down as people will have less money to spend in their wallets.
at the same time EU manufacturers are shutting down due to unsustainable energy cost.
So demand is going down and at the same time supply is also going down, maintaining the balance in EU.
This will make the Indian exporters continue to supply EU, but market may not grow.
I think situation in US is quite good at the moment. they recently appointed new distributor for US and I think they will do quite good over there.
Management trying to grow in domestic market where I don’t think they have any competitive advantage, this business may not be so fruitful.
Many headwinds will go away with time, but as long as EU don’t solve energy crisis, I don’t understand how the growth will come? this is small company and they may grow if hook any large customer, but that will be speculation so I have commenced selling small quantities, as I don’s understand the situation & have no clarity.
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