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Angel Broking: Chemcon Speciality Chemicals IPO - Outlook And Valuation

Angel Broking: Chemcon Speciality Chemicals IPO - Outlook And Valuation

A scientist mixes chemicals inside the new lab. (Photographer: Eric Thayer/Bloomberg)
A scientist mixes chemicals inside the new lab. (Photographer: Eric Thayer/Bloomberg)

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Angel Broking Report

Chemcon Speciality Chemicals Ltd. is a manufacturer of specialised chemicals, such as HMDS (hexamethyldisilazane) and CMIC (Chloromethyl Isopropyl Carbonate) which are predominantly used in the pharmaceuticals industry and inorganic bromides, namely Calcium Bromide, Zinc Bromide and Sodium Bromide, which are predominantly used as completion fluids in the oilfields industry.

In FY 2020, approximately 40% of their revenue came from export (including deemed exports).

For FY2020, revenue contribution from pharmaceutical chemicals and Oilwell Completion Chemicals was 63.8% and 33.5% respectively.

Outlook and Valuation - At the upper end of the price band, Company demands price to earning multiple of 22.1 times on FY20 basis.

None of the listed chemical companies has the same business as Chemcon. Its specialty chemical peers such as Neogen Chemicals Ltd., Paushak Ltd., Atul Ltd. and Aarti Industries Ltd. are currently trading at price to earning multiples of 57.0 times, 37.6 times, 29.6 times and 35.6 times respectively on FY20 earning per share.

Company return ratios and margins are better than most of its peers. We believe Company is clearly undervalued compared to its peers; a lot of value is left in the table.

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AngelBrokingResearch Chemcon Speciality Chemicals IPO Note.pdf

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