Styrolution ABS – MNC due for rerating

I was quite surprised to know that there in no writeup on this company, so here goes…

What if I told you there is a company meeting the the following investment criteria, would you be interested :

1. MNC company
2. 75% held by promoters
3. 10 paid up
4. zero long term debt
5. doing quarterly sales of 300r +
6. quarterly ebitda 34 cr+
7. Dividend paying
8. Had 3 manufacturing facilities with combined area 1.27 million sq feet
9. Investor friendly management which gives quarterly ppt and does concalls with investors
10. Available at mcap of 1300 cr
11. Reliance MF building up position every quarter

Sounds interesting..the name of the company is Styrolution ABS (India) Limited. It is the market leader for ABS (Acrylonitrile Butadiene Styrene, 45% india market share, capacity 110,000 mtpa ) and SAN (Styrene Acrylonitrile, 60% india market share, capacity 100,000 mtpa ) in India with three manufacturing facilities located in Gujarat.

ABS is a styrenics co-polymer used for manufacturing plastic components for a wide range of applications, with a major focus on automotive, household appliances, electronics,etc.
SAN is a transparent styrenics copolymer used mainly in applications including household appliances, imitation jewellery, etc

For full range of applications its good to visit www.styrolution.com and check out products and industries. This is the website of the MNC parent … will give you an idea of the full range of product application.

The parent is also strong with sales of 5.4 billion Euros in 2014 and is the leading global styrenics supplier . A 80 year old company , Styrolution ( the parent ) employs around 3100 people, operates 15 manufacturing sites in 9 countries, and has a broad customer base spread across over 100 countries worldwide.

Other key facts
– 70% of sales comes from specialty and 30% from commodity products
– crude is key raw material
– current capacity utilization for specialty is 80%…will hit 100% in 2 years
– they work on cost plus model, so neutral to crude price. However they need to book inventory loss/ gain if oil moves down/up respectively
– margin on specialty is double that of commodity products
– competition is from one local player and imports
– the specialized polymer industry grows at more than GDP, and this company aims to grow at atleast 2% more than the industry.

Given the above, I feel the stock needs to be re-rated.

Discl : invested at slightly higher levels
map when posted : 1300 cr