Neogen Chemicals Limited

Started in 1991, Neogen Chemicals Limited is leading manufactures and seller of bromine-based and lithium-based speciality chemicals in India. They offer speciality organic bromine-based chemical compounds (Bromine Compounds) and other non-bromine speciality chemical compounds comprising chlorine, iodine, and fluorine-based compounds, as well as grignard reagents for use in pharmaceutical, agrochemical, flavour, and fragrance and electronic-chemical industries. Speciality Chemicals:Water treatment chemicals, electronic chemicals, pharmaceutical intermediates, polymers additives, engineering fluids, and construction chemicals are speciality chemicals. These chemicals are used in multiple industries based on the requirements. Products:The company manufactures organic bromine compounds, inorganic lithium compounds and other organic and inorganic chemical products. The company produces a range of products for domestic and global markets. As on February 28, 2019, they have manufactured an aggregate of 198 products comprising 181 organic chemicals and 17 inorganic chemicals. The organic chemicals of the company are used in agrochemical, pharmaceutical, electronic chemical, fragrance and flavours. The product offering in inorganic chemicals section is used in air-conditioning (HVAC), heating ventilation, Vapor Absorption Machines (VAM), pharmaceutical, construction chemicals, refrigeration, and speciality polymer. The company markets and sells products in India, Europe, Japan and the USA. The manufacturing units of the company are Karakhadi, Vadodara in Gujarat and Navi Mumbai in Maharashtra. The competitive strengths of the company are: 1. Wide product range2. Stable customer base3. Continuous investment in R&D4. Highly knowledge-intensive industry5. Experienced management6. Stable suppliers As per financial performance, Neogen Chemicals has posted total income/net profits of Rs. 80.31 cr. / Rs. 3.67 cr. (FY14), Rs. 92.48 cr./ Rs. 4.97 cr.(FY15),     Rs. 109.04 cr. / Rs. 5.14 cr. (FY16), Rs. 121.78 cr. / Rs. 7.21 cr. (FY17) and Rs. 164.68 cr. / Rs. 10.53 cr. (FY18) . For upto Q3 of FY19, it has reported net profit of Rs. 12.30 cr. on total revenue of Rs. 159.69 cr. So company has posted good and consistent growth year on year. Trade receivables for FY18 was Rs 41.36 Cr, which is around 25% of total sales. Neogen has posted an average EPS of Rs. 4.34 and average RoNW of 19.72% for last three fiscals. Issue is priced at a P/BV of 7.02 as per NAV of 30.62 on 31.12.18. If we annualise latest earnings and attribute it on post issue equity, then asking price is at a P/E of around 30.58 and as per FY18 earnings P/E is around 47.67. As per RHP, industry average is around 37.67 and comparison with listed peers is given in above tables. So issue looks fully price as per latest earnings.  On BRLM's front, for Batlivala & karani Securities India Private Limited and Inga Advisors Private Limited, this is first IPO. ( As on 22.01.19 ) As per financials, company's has shown good results, RoNW is 19.91% for last three fiscals and issue is priced at P/E of around 30.58 as per latest earnings. Company has made its place in the bromine and lithium based products. The issue is fully priced as per latest earnings. But company has expansion plan and expected to grow with healthy rate. So we give NEUTRAL rating to this IPO.

• 1 Haridas Thakarshi Kanani
• 2  Harin Haridas Kanani