Started in 1998, Hindcon Chemicals Limited is primarily engaged in manufacturing of chemicals particularly for construction industry. Company offers a wide range of chemical products which finds variety of applications in the construction sector. HCL's portfolio consists of over 100 products which can be broadly classified into following categories: 1. Waterproofing additives for R.C.C. Structures, roof, basement, underground and overhead reservoirs etc.2. Plasticisers and Super Plasticisers which are used in Concrete & Mortar mixtures for improving their workability.3. Concreting Aids which are admixtures/chemicals that provide special properties to concrete like Curing, Strength, ShutterRelease, Corrosion prevention etc.4. Sodium Silicate which finds its application in various commodities such as soap, cements, card board, electrodes, textiles,pharmaceuticals, building materials etc.5. Protective and Waterproofing Coatings for walls, roofs, swimming pool, water tanks etc.6. Grouts & Repairing Mortar Admixtures which are used in grouting of underground structures, bolt packets, base plates etc.7. Shot Crete Aids which are used as accelerating admixtures for dry/wet shotcreting in tunnels, galleries, swimming pool,concrete repair works etc.8. Floor Topping products which are used in making floors more concrete or anti-skid or stain resistant or chemical resistant etc.9. Sealant Products which are used for sealing of cracks in structural members, tile joints, metal joints, expanision joints holes etc.10. Tile Adhesives which are used for fixing of ceramic & mosaic tiles on wall and floor11. Epoxy Grout & Mortar which are used for pressure injection into concrete for structural repair12. Foundry Aid which consists of sodium ligno based foundry grade compound for concrete admixtures, pesticides, foundries,leather tanning, drilling fluid etc.13. Coating/Impregnation Product for exposed aggregate finish on surface14. Cleaning Compound chemicals for removing rust from steel reinforcement, cleaning of tiles, floors etc.15. Expansion and Contraction Joint System Products which consist of injection hose to prevent passage of water throughconstruction joints and joint sealant for construction joints and cold joints HCL also undertakes waterproofing and rehabilitation jobs on works contract basis. In F.Y. 2016-17, from total revenues of company, 32.14% comprises of export sales to Nepal, Bhutan and Bangladesh. Few of its customers includes Larsen & Toubro Ltd., Gammon India Ltd., BGR Energy Systems Ltd., Hindustan Construction Company Ltd., Jaiprakash Associates Ltd., Patel Engineering Ltd, SEW Infrastructure Ltd. Company's manufacturing facility is located at Howrah, WestBengal which has an existing installed capacity of 30,000 MT per year. Company utilises around 50% to 55% of its installed capacity. On financial performance front, HCL has posted turnover/net profits of Rs. 30.91 cr. / Rs. 0.27 cr. (FY13), Rs. 30.92 cr. / Rs. 0.34 cr. (FY14), Rs. 34.97 cr. / Rs. 0.33 cr. (FY15), Rs. 33.45 cr. / Rs. 0.84 cr. (FY16) and Rs. 34.30 cr. / Rs. 2.08 cr. For first half of current fiscal, it has reported net profit of Rs. 2.13 cr. on a turnover of Rs. 18.13 cr. Thus its top line remain similar in last 5 years and there is sudden jump in bottom line for FY17 and H1 of FY18 which is very surprising. For last three fiscals it has posted an average EPS of Rs. 3.61 and an average RoNW of 9.65% on an equity base of Rs. 0.85 crore. If we annualise latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 7. Asking price is at a P/BV of 0.81 (on its NAV of Rs.34.42 post issue). As per offer documents, listed peers are trading at composite P/E of 31. So issue looks priced reasonably. On merchant banker's front, this is the 45th IPO since 2013-14. Out of last 10 listings, all opened with premiums ranging from 1% to 20% on the day of listing. As per financials, company's top line remain similar in last 5 years and there is sudden jump in bottom line for FY17 and H1 of FY18 which is very surprising, RoNW is 9.65% for last three fiscals and issue looks reasonably priced as per latest earnings. Company is engaged in manufacturing of chemicals particularly for construction industry and there is good potential for growth. So, we give SUBSCRIBE rating to this SME IPO.
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