Meghmani Organics Research Report By Stewarts & Mackertich

MOL: Gearing up for strong growth

Stewart & Mackertich Research initiates coverage on Meghmani Organics Ltd (MOL) with a Strong Buy rating. Meghmani Organics is an India-based company with diversified business interests ranging from pigments to pesticides as well as basic chemicals.

The company enjoys strong global presence with exports accounting to almost 51% of net sales. The company has done mega capacity expansion in the past few years and is now ramping up the plants to optimum utilization. FY18 onwards all the segments are expected to gather steam and the operations will generate enough cash needed for future asset acquisition.

Investment Rationale Highlights

– Meghmani has a well-diversified product portiolio Vertically integrated across all value chains

– Pigments and agrochemicals enjoys strong global presence

– Meghmani to embark on major Capex to expand its chemical business

– Meghmani reduced its long term debt and will soon be a debt free company

– Meghmani is run by experienced and qualified management team and technical personnel

Valuation: The company has undertaken aggressive expansion plans in the past few years and we expect that the installed capacity if run at op?mum level would clock net sales of around INR2100 crore by FY19.

Several other macroeconomic indicators like the recent uptick in chlor-alkali prices due to supply shortage will also support the final product price and the overall revenue of the company.

This could fuel big-time gains for the investors and considering all this we have valued the company on the basis of weighted average of Discounted Cash Flow (DCF), P/E and EV/EBITDA and arrive at a Target Price of INR140.