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A Chemical Company

Transpek Industries is almost 55 years old company engaged in the business of manufacturing and export of a range of chemicals servicing the requirements of customers from a diverse range of industries – Textiles, Pharmaceuticals, Agrochemicals, Advanced Polymers, etc. with its headquarters in Vadodra Gujarat.

TRANSPEK INDUSTRY

Current market price at the time of publishing this report-: 2128 Rs

Transpek company was founded in 1965. Creative Chemistry is identical with Transpek Industry Limited. It began with the production of acrylic plastic sheets at its factory in Atladra (Vadodra district), Gujarat. It stopped producing acrylic sheets in 1969 and began producing chemicals. 

Established in 1965 today Transpek Industry Limited is a  synonymous to Creative Chemistry. Originally it was Established with the manufacture of acrylic plastic sheets at its plant at Atladra (Vadodra district), Gujarat. In 1969, it discontinued manufacturing acrylic sheets and started manufacturing chemicals. 

TIL began with products such as sodium hexametaphosphate, sodium tripoly phosphate, phosphoric acid, and others. It later extended to produce sodium hydrosulphite (hydro), sodium formaldehyde sulphoxylate (safolite), thionyl chloride, and sulphur dioxide, the majority of which were produced for the first time in India. TIL just joined the worldwide scene in 1987, and it is now a government-recognized Export House.

The firm has expanded rapidly, diversified, and emerged as one of the most responsible chemical manufacturers and exporters. Transpek has built a reputation as a high-quality chemical manufacturer and supplier over three decades in the worldwide market. Transpek has developed an indigenous technique for chlorinated chemicals such as Thionyl Chloride and other Acid and Alkyl Chlorides based on its expertise in handling Chlorine and Sulphur.

Chlorination (Inorganic Chemicals), Acid Chlorination with Thionyl Chloride (Acid Chlorides & Fatty Acid Chlorides), Alcohol Chlorination with Thionyl Chloride (Alkyl Chlorides), Friedel-Crafts Reactions, Sulfonation, and Amidation are currently carried out by the organisation.

TUV India Private Ltd has accredited Transpek with ISO 9001:2015, ISO 14001:2015, BS OHSAS 18001:2007 for Management System, and ISO 50001:2011 for Energy Management System. Our firm is also a signatory to the Global Responsible Care Initiative, and numerous of its initiatives are now being implemented.

Over the years transept has achieved expertise in manufacturing and handling chlorine and Sulphur based chemicals thereby developing processes for chlorinated chemicals like thionyl chloride as well as various acids and alkyl chlorides indigenously. 

Business Products

The chlorination chemistry creates opportunities for supply of intermediates and specialty chemicals suitable for multiple end applications. Transpek also does sulphur chemistry and adding to that it is the first Indian company to introduce a few products like CAC (Chloro Acetyl Chloride), TC (Thionyl Chloride) in India and even in Asia. Both, chlorine and sulphur are very difficult to handle. They are extremely hazardous chemicals and what differentiates Transpek from others is its ability to handle such seriously hazardous chemicals in very, very large quantities going into thousands of tonnes. 

Applications

Coming to product portfolio applications, the products that are manufactured by Transpek find applications in many industry like 

  • Polymers
  • Pharma 
  • Agrochemicals
  • Flavors and fragrances 
  • Paints
  • Pigments 
  • Photo initiation and many other such applications. 

One of the major applications is Polymer

Transpek manufactures chemicals for polymer which in general called monomer. It manufactures two monomers, two different monomers and both of them are supplied to not only one customer,but to almost six or seven different customers. Although one customer has very significant volume but it supplies to six – seven customers and these are two different monomers. 

Transpek manufactures certain monomers. These monomers are used in manufacturing polymers which are typically very high strength, very strong, high durability, fire resistant and heat resistant kind of material with a very light weight. Because of these properties, they are used significantly in replacement of steel or other metals and also they are used in various other applications where high strength is required especially for example aerospace or defence and such applications.

These polymers manufactured using monomers from Transpek industry are typically used in very high end cars and some racing cars as well . In high end cars for example these polymers are used in three to four areas. 

  • One is for brake pads because of the friction, there is a lot of wear and tear that can happen and also there is a huge amount of heat generation. 
  • Second is clutch pad. Now that is of course clutch is no longer there because auto transmission system but today even in high end cars particular racing cars clutch is still there as they are not auto driven.
  • Third area is something where lot of heat is getting generated, but some other part near that heat is the insulator, then this kind of material is used. 
  • Nowadays there is also a talk of using some part of this polymer in electric cars, the main reason being to keep light weight. That has been talked upon, to the best of our understanding, so far no one has used it, but it has been talked about. 

In pharmaceutical industry, products are used to produce various products such as supplements, medications for cold, medications for cholesterol reduction, etc. 

Some of our products also find application in agrochemicals where they are used in manufacturing pesticide, herbicide, insecticide, etc. 

Manufacturing facility is spread over 100 acres and out of that about 55% is green belt. 

Financials

For Q3FY22

Company reported Strong operational performance for the 3rd quarter ended FY22.

Revenue from Operations came at INR. 1,800mn up +16.4% QoQ bias as well as +97.9% on YoY basis. The revenue growth was mainly driven by healthy volume recovery in key products as higher off-take from MNC customers. 

EBITDA stood at INR.313mn up +2.5% on QoQ basis and +121.3% on YoY basis.

EBITDA Margin improved by 183bps to 17.4% compared to 15.5% in the last year same quarter. 

Reported PAT came at INR 230mn up +30.7% on QoQ basis and +187% on YoY basis on the back of strong operational performance.

KEY Financials

  • Book Value of the company is about 782Rs
  • Company trades at a nominal PE of 18 while most of its peers trade at above 40PE multiples
  • Company had solid Operating profit margins in range of 16-20%.
  • Debt has reduced significantly over past 2 years.
  • Bank borrowings and public fixed deposit stand at Rs.62 Crores. 

Going forward 

Management expects 16% to 20% of EBITDA margin and normalized sales in its capacities would be anywhere between Rs.500 Crores to Rs.700 Crores in the coming period.

Management at this point is not sure how long would it take for the things to get normalised in aerospace and auto sector. However as soon as it begins to normalise there could be a meaningful impact on the company financials as well.

In the next two years, company is planning to introduce at least three to four new products. Revenue range for the most of these products are typically if they are being both on full capacity or full demand basis then it could be anywhere between Rs.10 Crores to Rs.30 Crores per product. 

Management is trying to do as part of derisking strategy is to balance volume distribution among four to five application segments. That is management is trying to reduce its dependency on the polymer segment. Currently it is around 70% while over the next 2-3 years it may go to about 45% to 50% and the balance would be in Pharma and agro along with some other applications. Management is also working on introducing some new products, which are value added products.

One of the key reasons as conveyed by the management for some decline in the revenue as well as profitability can be pointed to Air travel. How many of us say actually travelled by air international in the last nine months. Right?

Significant volume of Transpek’s product goes into aerospace industry. Since the pandemic airlines industry is on one which has been hit the most. The aircrafts are not being manufactured as well as manufacturing orders are also being cancelled.

Some impact has come from automotive business, so that is why the performance is not so good. 

Conclusion

Transpek Industries is almost 55 years old company engaged in the business of manufacturing and export of a range of chemicals servicing the requirements of customers from a diverse range of industries – Textiles, Pharmaceuticals, Agrochemicals, Advanced Polymers, etc. with its headquarters in Vadodra Gujarat.

Company caters to a wide base of customers spread across more than 16 countries. The key product of the company monomer finds its application across various different areas of which Defence , Airline Industry and Automobile sector happens to be the key segments. All of these segments are hit by and large due to the pandemeic across various countries.

Going forward management expects that there are significant opportunities to grow in acid and alkyl chloride market for various applications in the domestic as well as international market for which the company has already started taking actions.

Company is looking at the future expansion of the customer base, product profile & regional presence to broad base the potential for growth & minimising reliance/dependence on specific products/customers as well as company also has plans to introduce 3-4 new products in the coming period price range for which lies anywhere between 10-30 crores per product depending upon the size and volume of the customer. Thus Transpek Industry is worth exploring for long term.

Transpek industry was previously suggested at 1647 Rs and since then it hit 52 week high of 2695 Rs before falling to current levels thereby delivering almost 60%+ returns since suggestion.

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