JG Chemicals Limited is India’s largest zinc oxide manufacturer in terms of production and revenue for zinc oxide manufacturing through French process, which is the dominant production technology for producing zinc oxide and has been adopted by all the major producers in Americas, Europe and Asia. The market share of the Company is around 30% as on March 2022. They sell over 80 grades of zinc oxide and are among the top ten manufacturers of zinc oxides globally. Since the incorporation in 2001, they have expanded the business and scale of operations and have grown into a large, diversified zinc oxide player with a global footprint. The product caters to a wide spectrum of industrial applications, including in the rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agro-chemicals & fertilizers, speciality chemicals, lubricants, oil & gas and animal feed. They have built a long-standing relationship with customers across end-user industries in the tyres, ceramics, rubber, paints, cosmetics and batteries industry. Over the last three years, they marketed and sold the product to over 200 domestic customers and over 50 global customers in more than 10 countries. In India, tyre industry accounts for 70% of rubber consumption and the companies in the tyre industry are the largest consumers of the product. Along with being suppliers to 9 out of top 10 global tyre manufacturers and to all of the top 11 tyre manufacturers in India, they also supply to leading paints manufacturers, footwear players and cosmetics players in India. The Material Subsidiary, BDJ Oxides is the only zinc oxide manufacturing facility in India to have an IATF certification, which is preferred by tyre manufacturers supplying to original equipment manufacturers. As on December 31, 2023, the aggregate installed capacity of 77,040 MTPA is spread across the three manufacturing facilities located at (i) Jangalpur (Kolkata, West Bengal); (ii) Belur (Kolkata, West Bengal); and (iii) Naidupeta (Nellore District, Andhra Pradesh), which is the largest manufacturing facility and is owned and operated by the Material Subsidiary. The installed capacity of the Naidupeta Facility specified above, has recently been augmented by an additional 13,440 MTPA for zinc oxide and 10,080 MTPA for zinc sulphate and other allied chemicals. All processes at the manufacturing facilities are undertaken with modern engineering systems to minimize emissions. They have installed recuperators in most of the furnaces to reduce the carbon footprint. They have also been granted the consent and hazardous waste authorisation order under the ‘Orange Category’ for generation, collection, storage, transport, reuse, recycling, utilisation, processing and treatment or any other use of hazardous or wastes and permissible quantity of emissions per hour at all the manufacturing facilities, by the respective state pollution control boards. In addition to the aforesaid accreditations, they are also a member of the All-India Rubber Industries Association, India Lead Zinc Development Association, Bureau of International Recycling, Indo-German Chambers of Commerce, Material Recycling Association of India, Chemicals and Allied Products Export Promotion Council and the International Zinc Association. As per financial performance, JG Chemicals Limited has posted total income / net profits of Rs 440.41 Cr / Rs 28.80 Cr (FY21), Rs 623.05 Cr / Rs 43.13 Cr (FY22), Rs 794.19 Cr / Rs 56.80 Cr (FY23) and Rs 491.10 Cr / Rs 18.51 Cr (Q3 FY24). So as per previous financials data, company has shown good growth, but upto Q3 FY24 data indicates decline in net-profit as per common trend in the industry. Company has an average EPS of Rs 14.1 and average RoNW of 26.38% for last three fiscals. Issue is priced at a P/BV of 3.22 as per NAV of 68.68 as on 31.12.23. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 20.08, 15.25 and 35.09 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, three lead managers are associated with this IPO, and have handled around 3 IPOs in last three fiscals. Centrum Capital Limited : The BRLM has not handled any IPO in last 3 years. Emkay Global Financial Services Limited : This is 2nd Main Board IPO from this BRLM. From last 1 Main Board IPOs, that opened below issue price on the day of listing. As of now, from last 1 Main Board IPOs, that is trading above issue price.( As on 29.02.2024 ) Keynote Financial Services Limited : This is 3rd Main Board IPO from this BRLM. From last 2 Main Board IPOs, all opened above issue price on the day of listing. As of now, from last 2 Main Board IPOs, one is trading below issue price and remaining is trading above issue price.( As on 29.02.2024 ) As per financials, JG Chemicals Limited has shown good growth, RoNW is 27.49% and P/E is respectively 20.08, 15.25 and 35.09 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced. Company is in business of chemical manufacturing, specifically zinc oxide, which is highly competitive and fragmented segment. The company has long term relationship with clients. So, we give SUBSCRIBE rating for this IPO. But complete chemical sector is going from bad time, so it may affect listing of this company also. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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