Cmp-29.50
Fineotex Chemicals is a 100% debt free 41 years old company promoted by Tibrewala family. Fineotex Chemical Limited engaged in manufacturing of Speciality chemicals, Enzymes for Textile and Garment Industry, Water Treatment Industry, Leather Industry, Construction Industry, Paint Industry Agrochemicals, Adhesives and others.
Founded in 1979 by Surendra Tibrewala , it was only later in 2004 the company was incorporated as private limited company with the name Fineotex Chemical Pvt Ltd in the State of Maharashtra.
Fineotex has been ranked amongst India’s Top 1000 Companies by National Stock Exchange of India. Fineotex has ISO 9001:2000 from JAS-ANZ Certification. The company went public in October 2007. In 2011, Fineotex Chemical Ltd incorporated a Wholly Owned Subsidiary in Malaysia to continue the business in that region.
BUSINESS
The products manufactured by fineotex chemicals include ,
Textile chemicals- major contributor to the top-line FCL has a major emphasis on textile chemical industry where it caters to the entire value chain for the textile industry including pre-treatment, dyeing, printing and finishing process. Textile is a major contributor to the topline forming 85-90% of the total revenue. The company is a leading player in finished chemicals segment in India, with a major focus on dyeing and finishing chemicals that have higher applicability on textiles, which are more profitable. It consumes more than 300 raw materials like DCDA, DMA, 2 Ethyl Hexanol, Maleic Anhydrite, Acrylamide, Organic Surfactants, Butyl & Styrene Acrylate, Deta and Para formaldehyde.
- Pre Treatment Process
- Printing Process
- Dyeing Process
- Finishing Process
Agro Chemicals- Speciality Chemicals-: It includes chemicals which are used in Industries such as Oil and Gas industry , Water Treatment, Paper Adhesives and Deformer.
Fineotex has 22,000 tonne capacity across two facilities in India (15,500 tonne) and Malaysia (6,500 tonne). It manufactures over 400 different products with established presence across the entire textile value chain ranging from pre-treatment, dying, printing and finishing processes thereby making it a one-stop shop for any textile solution. Fineotex has successfully penetrated a typically niche market with a sticky customer profile that was formerly governed by dominant MNC players. The company sells its product under its own brand “Fineotex”. In its R&D facility, new products are constantly developed and continuous trials are conducted at customer’s shop floor.
FCL has more than 400 products in its portfolio and caters to the entire value chain for the textile industry including pretreatment, dyeing, printing and finishing process. It also manufactures chemicals for various industries like agro, adhesives, construction and water treatment. With such a strong product portfolio, FCL has a presence in about 60 countries.
In 2015, Fineotex was recognized as Star Export House by Directorate General of Foreign Trade, Ministry of Commerce and Industry. Having an impressive growth record in the international market, the company is expanding its exports directly & also indirectly through export house. The company has the mission to expand its business and provide the best product to many other countries of the world.
The Group success is based on: Quality, Continuity, Flexibility, Reliability, Competitive Pricing, Technology upgrading and new product developments.
Over the period of years, company has developed a solid reputation for quality and reliability and has more than 105 distributors in India, number of customer worldwide and also well-known corporate are esteemed customers. The company supplies to most of the well-known Multinational Companies worldwide.
CLIENTAL
BIOTEX ACQUISITION
Company made a smart strategic acquisition of Biotex, an innovative speciality chemical manufacturer (2011). Biotex, through its indigenous research, has developed a unique non-poisonous product called “Aquastrike VCF”– mosquito killer liquid, commercialised in some Asian countries and is awaiting approvals elsewhere. It has strong potential and provides option value to the stock. In FY17, Fineotex recorded sales of | 128 crore, EBITDA of | 30 crore with corresponding EBITDA margins at 23.6% and PAT after minority interest at | 20.6 crore.
Biotex a value buy and instrumental in growing Fineotex brand In 2011, the company acquired 60% in Biotex for 8.5 crore. It is spearheaded by Dr Cedric Veniat, a technocrat with over 25 years of experience in speciality chemicals industries. Apart from providing multifold returns on its investment, Biotex’ technological edge has enabled Fineotex to compete against global textile auxiliary giants like Archroma, Clariant, Huntsman, etc. Currently, Fineotex accounts for ~8% market share (2017) in the Indian textile auxiliary chemical market (pegged at ~| 1500) crore with almost all textile majors like Arvind, Grasim, Birla, Raymond, etc, as their clients
Aquastrike VCF
It is an environment friendly non-toxic revolutionary solution which doesn’t kill mosquitoes alone but kills the larvae and the pupae of mosquitoes thereby completely eradicating mosquitoes. The ministry of health in Malaysia’s has already given it a go ahead. It can be used by common citizens directly. It is a non-pesticide, non poisonous to humans and they have already effected sales in Singapore and Malaysia. The company has applied for patent and has also applied to the WHO and the numbers as far as the financials goes which as mentioned is without taking into account any sales from this product. But this product has a potential to deliver business of billions of dollars in the years to come for this company.
(Above para is backdated and we have no recent update regarding the same.)
BUYBACK
Company announced buyback in 2016 to buyback its fully paid-up equity shares of face value of Rs.2/- each from the Open Market through electronic trading mechanism of the Exchange. The Maximum Buyback Price would not exceed Rs.40.
On January 27, 2017 the board of directors confirmed via board resolution about early closure of the buyback. The company had brought back 9,98,110 equity shares taking total promoter holding to 73.22%.
Over the years promoters have increased their stake from 62% to 73.22%.
FINANCIALS
Quarterly-:
Net Sales at Rs 49.65 crore in June 2019 up 15.87% from Rs. 42.85 crore in June 2018
Net Profit at Rs. 5.52 crore in June 2019 down 10.46% from Rs. 6.17 crore in June 2018.
EBITDA stood at Rs. 8.46 crore in June 2019 down 11.13% as compared to the same quarter previous year.
Yearly-:
Sales is up by 29% in 2019 as compared to 2018 with operating profit up by 12% while the net profit remained the same as well as the EPS.
Apart from that company has stable operating profit margins in the range of 18-22%.
Compounded Sales growth of the company over the period of 3 and 5 year stands at 18% and 16% respectively
Compounded Profit Growth of the company over the period of 3 and 5 year stands at 10% and 32% respectively.
FUTURE PROSPECTS
During the process of manufacture, textiles go through various chemical treatments. This includes pretreatment, dyeing, and refinement of textiles. Special chemicals such as flame retardants, water repellents, and warp sizes are used in this process. More than sixty different textile chemicals are used in various textile processes like yarn formation, fabric pretreatment, laminating, finishing, and coating. Textile dyes and chemicals segment is the largest component of the chemicals industry. Dyestuff segment is the biggest industry due to its forward and backward linkages with versatile applications in textiles, leather, printing inks, paper etc
There is a steady growth in the economy since 2012 there has been a gradual growth in the economy.
During the last few years, the consumption pattern in the various regions have more or less remained similar. There is a minor percentile reduction in 2018 over 2015 in China which is the major consuming country accounting nearly half of the world consumption. During the corresponding period the consumption show a small percentage rise in India. Significant increase has taken place in neighboring Pakistan.
India is the second largest exporter of textiles globally. Stringent environmental regulations in China have forced several dye manufacturers to shut down their plants. Global consumption of textile chemicals grew 2.8% per year on a volume basis during 2012–15. Economic Growth is driven by domestic demand for quality textiles and exports of high quality textiles. With improved economic condition the outlooks is bright.
KEY TAKEAWAY-:
- Company is 100% debt free.
- Company is trading at the PE of just 13 while that of industry average stands at 48.
- Company has solid ROCE of 23% which is the lowest among all other years.
- Company has ROE of 15.56% (Latest)
- Investments made by the company other than Fixed Assets has been steady at Rs 48 crore.
- Cash and Equivalents as of 2019 is at Rs 14.74 crore.
- Company has Reserves and Surplus of Rs 136 crore.
- Promoter hold significant stake in the company at 73% and are steadily increasing the stake over the time.
- Company is a regular dividend paying company.
CONCLUSION-:
The stock is currently trading at 29rs near its 52 week low after hitting its all time high of about 95 Rs.
Going forward with the slightest growth in the company sales will have multifold effect of the stock price due to expansion of the valuation multiples.
Warning-: Microcap penny stocks are extremely risky. In past we have suggested a large number of companies in this segment which have failed very badly. There is no deterioration in the fundamentals but unfortunately have failed to deliver any meaningful returns. Therefore we request all the users to not jump into this stock merely because it has been suggested by us of is available at a price below 50 Rs or for any such returns. This in no way is any suggestion or an investment advice and we will not be responsible for any loss. Also no update or queries will be entertained for this company in case of any adverse events, as a result users are requested to not unnecessarily post the queries regarding the same.
