Chemcon Speciality Chemicals – IPO

Chemcon Speciality Chemicals –IPO (Niche chemical player with high entry barriers and healthy financials)

Issue Details

Price Band: Rs 338 – 340

Bid Lot: 44 shares

Issue Date: 21-Sept-20 to 23-Sept-20

Minimum Investment – Rs. 14960/-

Issue Size: Rs 318cr (Rs165 cr fresh Issue and OFS Rs153 cr)

Post-issue market cap @ Rs340: Rs1,250 crore

_View:- Leadership position in niche Pharma Chemicals (HMDS, CMIC), Healthy financials and comfortable valuations.

• Chemcon is the only manufacturer of HMDS in India and 3rd largest globally.

It is also the largest player of CMIC in India and 2nd largest worldwide.

Additionally, Chemcon is the only manufacturer of Zinc Bromide and the largest of Calcium Bromide in India.

• Over FY18-20, Chemcon’s revenue /PAT grew at a CAGR of 29%/36%.

Its EBITDA margins are strong at 26.8% in FY20. Return ratios are healthy with ROE/ROCE at 40%/33% in FY20.

• Chemcon plans to set up two more plants for manufacture of Pharma Chemicals (capex of INR410mn), which would increase its capacity from 375KL to 626KL (operational by FY22 end).

• At the higher end of the price band, the issue is valued at 25.5x FY20 P/E (fully diluted), which is comparable to peers.

leadership position in niche products, along with high entry barriers and healthy financials.

• Further considering the bright prospects for Chemical companies due to shift of supply chain away from China, we believe Chemcon would be well placed to capture this with its planned capex.

• Risk: (1) Client concentration, (2) limited product portfolio.

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