Camlin Fine Sciences was formed in 2006 as part of the Camlin group and is now a leading manufacturer and exporter of food grade anti-oxidants and industrial chemicals. It has a 50% market share in the TBHQ segment and over 70% in the BHA segment. Higher realisation from products like anti-oxidant blends and vanillin will increase margins from 15% to 22% and 30% CAGR in sales over the next three years. The company has reported best in class return on capital employed (ROCE) ratio of 29% and coupled with the improvement in working capital, this will enable it to maintain superior returns on capital in the future. In order to increase their global presence and leadership, Camlin Fine Sciences is setting up a manufacturing facility in Mexico and a joint venture in the US to tap the lucrative overseas market. Backward integration has yielded great results for the company with the acquisition of HQ chemical producing foreign company Borregaard Italy (now CFS Europe). This has led to an improvement in the raw material and sales ratio. Based on industry reports, the market size of some of the company’s downstream products is over $300 million and Camlin Fine Sciences is expected to address the pet food, animal and Aqua feed market in a large way. Globally the company is competing with market leaders Rhodia Speciality Chemicals and Mitsui Chemicals. Analysts expect revenue and PAT to grow by 27% and 33% respectively over the next three years. Healthy free cash and a strong balance sheet are the key value drivers for stock performance in the medium term. Camlin Fine Sciences stock is currently trading on the bourses at Rs 108 and is expected to achieve a target price of Rs 180 by December 2016. All stock market players will be glued to the television sets on Sunday to see who wins the vote of confidence in the Bihar elections. I did a little research to track the movement of the Nifty during the last two years post elections. On 8 December 2013, the result of elections in Chhattisgarh, Delhi, MP, Mizoram and Rajasthan showed the BJP winning 3 out of 5 states and the Nifty fell down by 5% in the next ten days. While on 10 February 2015, the result of the New Delhi election was declared where the BJP lost and the AAP won by a huge majority and surprisingly the Nifty jumped 5% in the next ten days. Now, with the result of the Bihar election to be announced on 8 November 2015, it will be interesting to see the direction of the Nifty in the next ten days.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.