GANESH BENZOPLAST

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Current Price-: 61 Rs

Market Cap-: Rs 382 crores

Debt to Equity -: 0.3

Book Value- Rs 27

PE -: 7 (ttm)

Return on Capital Employed-: 36%

Return on Equity -: 32%

Operating profit Margins-: 30%+

This is an almost 35 years old company , one of the leading independent Liquid Storage Tank (LST) provider  for bulk liquids and chemicals at various ports in India and is also engaged in the manufacture, export and import of a range of specialty chemicals, food preservatives and industrial lubricants.

Incorporated in 1986 Company is promoted by Shankarmal Pilani and his sons and R D Punjabi an associate with its headquarters in Bombay Maharashtra where the company also has installed 10800 tpa capacity to manufacture chemicals. It is also in the business of manufacturing speciality chemicals , food preservatives and oil additives.

Business / Products

Liquid Storage Terminal Division (LST)

Company has more than 30 years of experience in Bulk storage and handling of liquids. Currently the company is one of the India’s largest provider of storage facilities for bulk liquids and chemicals includes one of the liquid chemicals, oil products, petrochemicals, biofuels, and vegetable oils. Company offers more storage capacity than any other independent tank terminal operator in the locations it is present.

The wide range of storage and handling services which company offers on a global scale include, amongst others:

• Various types of storage tanks such as Stainless Steel, Mild Steel, Insulated, Epicoated Tanks
• Heating and/or cooling of stored products
• Product blending to customer specifications
• Product transfer (from and to trains and road tankers, from ship-to-ship)
• Drumming

LST division provides storage tanks which are leased on rent for storing liquid chemicals, acids, phenol, oil products and edible oils etc. The Company provides complete storage and handling solutions at 3 terminals namely JNPT (Nhava Sheva), GOA AND COCHIN, which require specialised infrastructure at terminals such as specialised berths, weighting equipment, pipelines, transit storage and handling facilities and above all, safe and environmentally responsible handling practices. As energy consumption increases in India, growth in demand is likely to require safe and sophisticated logistics services. 

In LST division, the Company has a combined storage capacity of more than 3,00,000 KL, for storage of all types of Liquid Products such as ‘A’, ‘B’, and ‘C’ class liquids.

The Company has total 82 storage tanks at JNPT, Goa and Cochin terminals. The Company is continuously upgrading its storage facilities by regular refurbishment of tanks and pipelines. In LST division during the last year Company had incurred major repair and maintenance work at its terminals. During FY 2019-20, the Company performed well in Liquid storage business, with an increase of 19% in revenue. The Liquid Storage business of the Company performed well with the investments in new capacity commissioned in the previous year and optimum capacity utilization levels. The business uncertainty introduced by the outbreak of the Covid-19 crisis in March 2020 did not affect the liquid storage business of the Company. 

JNPT TERMINAL

Key Aspects-:

• This is an ISO 9001:2008 certified terminal .
• Total capacity: approximately 250000 KL with tanks which include MS, SS tanks. Individual Tank capacity varies between 500KL to 14000 KL.
• Twenty six number of bays for tank lorry filling with loading capacity of 400 road tankers per day.
• Rail wagon loading facility with SS & MS Steel tank containers.
• Jetty main liquid length & width continuous piled 275 M long & 40.5 M wide with facility to berth ships on both sides.

GOA TERMINAL

KEY ASPECTS

• This is an ISO 9001:2008 certified terminal
• Looking to expand into LPG business in Goa

COCHIN TERMINAL

KEY ASPECTS

• This is an ISO 9001:2008 certified terminal
• Total capacity 38000 KL; includes 11 MS tanks
• Individual tank capacities varies between 750 to 5000 KL

OTHER SERVICES INCLUDE

• Bunkering
• Barging
• Blending
• Drum Filling- Company is having fully automated and stainless steel drumming lines imported from Germany (BP matic). The entire system is flame proof (including the forklift used in operations). Currently company is drumming approx 100 containers a month of various products like Acetic Acid, Methanol, MEG, Toluene and Ethyl Acetate.

CUSTOMERS 

Chemical Division

Company is manufacturer, exporter and supplier of  Benzoic Acid, E212 Class 2 food preservative, antifungal agent for food, drink, beverages and pharmaceutical industries. Benzoic Acid has vast applications and available in variety of grade, Company’s Benzoic Acid is appreciated by paint manufacturer all over India  and  also by global paint industries apart from food and beverage industries.

Under Chemical Division, the Company is engaged in manufacturing and exporting wide range of Acid, E212 Class 2 food preservative, antifungal agent for food, drink, beverages and pharmaceutical industries, lubricant additives & specialty Chemicals. 

Company’s products are used in food & beverage, paints, automobile, pharmaceutical, lubricants industries etc. 

The Company markets its products through distributors in other countries. This Company is the only manufacturer of pure Benzoic Acid & its Derivatives like Sodium Benzoate well known food preservative and Benzoplast a Specialty plasticizer which is a superior plasticizer as compared with other plasticizers. Sodium Benzoate and Benzoic Acid have good demand in International Markets.

Applications of Sodium Benzoate and Benzoic Acid in Food and Pharmaceutical Formulation and Technology

Therapeutic use of Sodium Benzoate and Benzoic Acid in injectables- Intravenous and Intramuscular formulations, for treatment of cancer and lubricant tablets

Other applications of Sodium Benzoate and Benzoic Acid are-:

Lubricant Additives and Fuel Oil Additives

• ENGINE OIL & FUEL OIL ADDITIVES
• INDUSTRIAL LUBRICANT OIL ADDITIVES
• PETROLEUM SULPHONATES
• PERFORMANCE CHEMICALS
• DRIVELINE ADDITIVES

Aftermarket Performance Chemicals

• Extreme Pressure Additives
• Polyisobutenyl Succinic Anhydride (PIBSA)Anti Oxidant – ZDDP
• Detergent
• Viscosity Modifiers
• TBN Boasters

During the year, Ganesh Benzoplast Ltd has been able to improve the profitability, due to better capacity utilization and increased sales volume. Chemical Division of the Company is showing better performance in terms of increase in revenue as well as profitability as compared to the past years.

EPC services providing end to end solution

Acquisition in Rail Logistics business

A positive for LST division The company recently acquired 86.5% of a company named ‘Stolt Rail Logistics Systems’. This company is into providing bulk liquid cargo transportation which carries liquid cargo from ports to customers’ doorsteps. This business ensures safety by avoiding manual and truck handling, improves efficiency and increases profits due to reduction in supply chain costs for buyer.

Plans to separate business 

This may unlock value for shareholders. In order to improve focus on each of the two businesses separately, company is considering separating out them as GBL Infrastructure Ltd and GBL Chemicals Ltd and listing each of them, governed by different well defined leaderships. This will enable the company to plan and strategise different businesses and game plans for sustainable growth. This will also unlock the underlying value of both the businesses. Also we can see that Chemicals business has uneven margins each quarter and is a capital intensive business (to enhance the facilities) with a high working capital and low capacity utilization ( 70%). This business has often been a drag on the overall performance in the past, though now it is recovering. Therefore, separating out this business will enable better focus on Chemicals business and enhance the numbers of LST division.

Reduction in Pledge/encumbrance 

In Q1, banks/ institutions released the pledge over promoters’ shares completely. This was very heartening news as company has gained success in its endeavour to de-pledge. 

At the end of March 2020, the pledged percentage was 64.55% (1,44,85,418 shares) which was brought down from 78.89% (1,75,85,418 shares) at the end of June 2019 quarter, which is now NIL. 

Thus company is free from encumbrance. 

Reduction in Debt

Also the company has amassed a good deal of cash in its balance sheet by end of Q2, despite debt reduction. At the end of Q2, the total cash and bank balance of Ganesh Benzoplast Ltd reached ₹152 mn v/s ₹39 mn at the end of FY 20. In the same period, total debt went down by ₹85 mn (LT Debt went up by ₹17 mn, while ST debt came down by ₹102 mn). The net Debt to Equity ratio now stands at 0.3x at the end of Q2 FY21 from 1.1x at the end of FY 18 and 0.4x from the end of FY 20.

Capital Expansion

As a latest development consequent to Maritime India Summit 2021, the company has signed MOU’s worth Rs 625 crores for as storage tank farm expansion plan at JNPT Rs 500 cr, Goa Rs 100 cr etc.

Financials

For Q3 Fy 21

• Revenues moved up by 4.2% yoy and 16.6% qoq.
• EBITDA increased by 11.1% yoy.
• LST division grew by 43.9% yoy at ₹393 mn during the quarter.
• The chemicals division EBIT margins have been fluctuating as they stood at 1.7% down from 23% qoq and 3.5% yoy.
• The Chemicals division (the share of which at 38% of sales in Q3 is lower since past many quarters) will attract strong demand. 
• LST business will continue to post strong sales. 
• Net Sales at Rs 63.41 crore in December 2020 up 4.2% from Rs. 60.85 crore in December 2019.
• Quarterly Net Profit at Rs. 10.34 crore in December 2020 up 14.4% from Rs. 9.04 crore in December 2019.
• EBITDA stands at Rs. 19.17 crore in December 2020 up 11.07% from Rs. 17.26 crore in December 2019.
• Company’s EPS has increased to Rs. 1.80 in December 2020 from Rs. 1.75 in December 2019.
• Bottom-line grew by 14.5% yoy.
• Compounded Sales Growth for the company over 3 and 5 year period is 28% and 15% respectively.
• Compounded Profit Growth for the company over 3 and 5 year period is 40% and 43% respectively.

It is further expected that chemicals division will revive again in the ensuing quarters as we expect FMCG, Automobile and Pharmaceuticals demand to firm up

GOING FORWARD

With the growing energy demand in India and increase in the movement of oil, chemicals and petrochemicals, there is therefore a huge potential for the expansion of pipelines, transportation and infrastructure and the Company will get good business opportunities in the coming years also. LST division is expanding in the eld of EPC projects for construction of Storage tanks and pipeline in near future. During the year 2019-20, the Liquid storage business of the Company performed well to optimum capacity utilization at all the terminals of the Company and this is the main reason behind turnaround in Financials. Handling of liquids and chemicals provides an important and stable source of Group profits by way of terminating fees. 

The capacity utilization at J.N.P.T. Tank Farm is 100.00 % and at Goa and Cochin capacity utilization is 40% and 95% respectively and management expects this pattern to continue in the future. The Company’s products have been enjoying consistently good brand image and loyalty from the consumers for the past several years and the Company enjoys virtual monopoly in Sodium Benzoplast in India. 

The Company manufactures Benzoic Acid and Sodium Benzoplast in its computerized plant at Tarapur, The markets for products of the Company are well established with a good distribution network for domestic as well as export markets.

CONCLUSION-:

Company’s LST division excelled, while Chemicals division is getting back on track. The company is reducing its debt and generating a good amount of cash now, as its Net D/E has reduced from 0.40x at the end of FY 20 to 0.25x by the end of Q2 FY21 which is a significant positive sign. Additionally promoters pledged shares have also released by bank thus making company free from encumbrance.  Further management is aggressively trying to take capital expansion. Also there are plans to separate businesses which may unlock value for shareholders. Given its currently earrings that is for the year ended March 2020 , company trades at extremely cheap valuations of around PE of 9.4 with an EPS of 6.5 where as its peers trade at significant higher valuations of about more than 30 PE. Thus their seems significant value in company based on the strong future prospects , expansion in earning multiples as well as the demerger if goes through. On a prudent basis it can be expected that company may perform or grow at the rate of 10-15% cagr over next few years.

As for demerger sometimes a lot of regulatory approvals are required which may lead to significant delay posing hurdles for the company in unlocking the value to created for the shareholders. Therefore we request users to please not post any queries regarding the demerger of the company.