Market Research : Thirumalai Chemicals

Thirumalai Chemicals Limited (TCL) is a publicly listed company in BSE. TCL ranks among the largest producers of Phthalic Anhydride, Malic Acid, Maleic Anhydride and Fumaric Acid in the world. TCL is present in more than 34 countries.

Reasons to invest :

  • Thirumalai Chemicals is the second dominant player in the domestic Phthalic anhydride (PAN) industry with the market share of over 40 percent after IG Petrochemicals.
  • Thirumalai Chemicals has lined up PAN capacity expansion of 60,000 MT at Dahej, of which the first phase is going to be completed during FY19E.
  • The raw material used for manufacturing PAN has fallen at a sharp rate, increase in domestic PAN demand, capacity expansion to cater growing demand for PAN in India are indicating a growth inception
  • Expansion of food ingredients and fine chemicals capacity by 40 percent is on track.
  • Malaysian subsidiary is likely to report strong earnings which is an additional benefit.
  • Further, Thirumalai’s value-added product portfolio such as maleic anhydride (MAN), diethyl phthalate (DEP), and food acids have steady demand from the food and beverage, cosmetics, animal feed industries.

Key risks:

  •  The major product of Thirumalai Chemicals such as PAN and Maleic Anhydride is dependent on user industry, any slowdown in user industry will put pressure on the overall profitability of the company.
  • As Thirumalai Chemicals imports some part of its raw material, any negative price fluctuation or sourcing problem may impact the business growth of the company, so there is a market dependence for raw material which could affect the overall cost of end product.
  • Any negative fluctuation of rupee against major currency may impact the margin of Thirumalai Chemicals.Thus the operational margin will be affected.

Fundamentals and Technical Facts:

  • Market Cap: 2041.50 cr
  • EPS: 68.88
  • PEG: 0.10, which indicates that the stock is very undervalued in terms of valuation
  • YOY Results: Net profits show more than 100% growth for past 3 years and is expected to do same this year. Same followed in operational profit margins (OPM) and EPS with more than 50% in OPM and around 30- 50% in EPS  growth for past 3 years time period respectively.
  • QOQ Results: We see more than 50% growth in September and December quarters net profits. OPM too see a sign of growth.
  • Debtors Turnover Ratio is highest at 8.31 times (DTR -Is an activity ratio, which measures how efficiently a firm uses its assets )
  • ROCE of the company is 37.76% whereas ROCE of an industry is around 12% (ROCE: Return on capital employed, it shows how effectively capital is employed and profitability)
  • OPM of the company is 19.71 %, whereas OPM of an industry is 13.21 %.

PEG < 0.50 is considered an opportunity , as the stock with that peg is undervalued.

Entry price and Target : 

  • As the stock is already undervalued, so you can invest @ 1850-1920
  • Target -2700 –is a result of increasing demand and low valuation, by the end of 2019.

Disclaimer : 

All blog posts of wealthblog.in are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyze all securities before investing in one.

Experience of 8 years in stock investment. I learned everything by making a lot of mistakes and losing a good amount of money, I am here to make sure you don’t lose on either: Hope or Money.

5 thoughts on “Market Research : Thirumalai Chemicals

    1. Start collecting in small counts below @1700 and keep collecting in small counts to take advantage of every dip it make.

    2. I think, If you would have bought at that price it was an opportunity. Now they have declared dividend. So it will go up further but the gain if you enter now would be small. Hope this helps.
      Regards
      Anurag

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