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SENSEX: 33601.68 138.71

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Multi Baggers

Hem Securities

12.00 AM Aug 27th

Meghmani Organi

BSE ID : 532865     NSE ID : MEGH

RECOMMENDED PRICE 72.65

PEAK FROM RECO 129.40 78.11%

CURRENT PRICE 105.15 44.74%

Looking at strong future growth, huge capex plan and margin expansion, we recommend "Buy" on the stock with price target of Rs 95 for medium to long term investment.

Meghmani Organics Ltd

Meghmani Organics Ltd holds 57% stake in Meghmani Finechem Ltd, which is planning the Capex of Rs 5.4 bn. Looking at strong future growth, huge capex plan and margin expansion, we recommend "Buy" on the stock with price target of Rs 95 for medium to long term investment.

Company has posted strong numbers in Q1FY18 with whopping jump of 17% in topline as compare to Q1FY17 while bottomline of company has witnessed stellar rise of more than 74% on YoY basis in Q1FY18. On margin front also, company has shown growth of 4% in operating profit margin at 19.78% in Q1FY18 while consolidated net profit margin of co has witnessed rise of 48% at 7.11% during the same qtr as compare to Q1FY17. The company has grown at strong CAGR of more than 55% in its bottomline from FY14 to FY17 while net profit margin of co was expanded at CAGR of more than 30% during the same period.

The size of the global Pigments market is expected to rise to $32 bn by 2023, growing at a CAGR of 3.8%. The global paints & coatings market is projected to grow at a CAGR of 5.5% during the period of 2017-2022. This is expected to give a strong boost to the global pigments market & thus pave the way for increased opportunity in pigment segment for company present in this segment as co has 8% global market share & is among top 3 Capacity wise global pigments players.

In Agrochemical segment, company has 227 export registrations, 496 registrations in pipeline, 354 CIB registrations, and 35 registered trademarks. The Company has a strong global client base .The Company exports technical as well as branded products to Africa, Brazil, LatAm, the US, and European countries.

Co has already spent Rs 6.5bn over last 5 years to increase capacity. Company has strong capex plan involving Rs 5.4 bn of investments over the next 2-3 years. The project will be a major growth-driver, going ahead. In three-four years, all of co’s divisions : pigment, agrochemicals and basic chemicals will touch Rs 1,000 crore of revenue individually, according to management.

Valuation

Co has shown strong financial performance during Q1FY18 & going forward all segments of company are expected to progress. Agrochemicals segment will be driven by better industry demand due to good monsoon in FY18 along with the proposed key reforms and increased funds in Budget FY17. Pigments Segment of company will perform with increasing share of higher-value-added products as the Beta Blue plant is fully ramped up and Basic Chemicals Segment of co will show growth with increased utilisation of Caustic Potash.This gives strong revenue visibility going forward.

The company is currently trading at 18.16x of TTM eps of Rs 4.00 while it is trading at 14.86x of FY18E eps of Rs 4.89 & 12.21x of FY19E eps of Rs 5.95. Looking at strong future growth, huge capex plan & margin expansion, we recommend “Buy” on the stock with price target of Rs 95(appreciation of almost 30%) for medium to long term investment.

For full details, Click on the attachment.

 

Disclosure of Interest Statement
1. Analyst Ownership of the Stocks - No
2. Hem & its Group Company Ownership of the Stock - No
3. Hem & its Group Company Director Ownership of the Stock - No
4. Broking relationship with Company covered - No

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication. Analyst Certification: The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

MeghmaniOrganics_PYT_HemSec.pdf

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