Vikas Ecotech : A Company with Huge Potential

                         

                        VIKAS ECOTECH LTD : A Company with Huge Potential

CMP : 22

BSE CODE :530961

Market Cap : 670 Crores

       LISTED ON : NSE AND BSE

TARGET : 60/80/100

TIME-FRAME : 12-16 Months

History of the Company :

Vikas Ecotech is the first and only Indian company with an integrated in-house facility to produce Organotin, which is a US FDA-approved ingredient for the PVC industry.

Vikas Ecotech is an emerging player in the global arena of the high-end specialty chemicals players.As an integrated, multi-specialty product solutions company, it produces a wide variety of superior quality, eco-friendly rubber-plastic compounds and additives. Rubber-plastic compounds and additives are process critical and value enabling ingredients used to manufacture a varied cross-section of high-performance, environment-neutral and safety-critical products.

From agriculture to automotives, cables to electricals, hygiene to healthcare, polymers to packaging, textiles to footwear, it's products serve a diverse range of global industry needs. Vikas Ecotech is a two-star rated export house exporting it's products to 20+ countries.

Products:

• Speciality Additives (Organotin Stabilizers,Dimethyl Tin Dichloride,Plasticizers, Flame Retardants,Chlorinated Polyethylene)
• Polymer Compounds (Thermoplastic Rubber (TPR) Compounds,Thermoplastic Elastomer (TPE) Compounds, Ethylene Vinyl Acetate (EVA) Compounds)
• Recycled Materials (Poly Vinyl Chloride (PVC) Compounds,Polyethylene Terephthalate (PET) Compounds)

Financials of the Company :

• Profit After Tax (PAT) for the year ended on 31st March,2017 has been reported  at Rs 23.17 Crore and turnover at 373 Crore.
• As per the numbers as on 31st March,2017 the company has generated Return on Equity of approx. 46% , Return on Capital Employed of 34% and Return on Assets of 27%
• Promoters have sensed need for additional capital to complete a major expansion and so have issued 2 crore equity shares on preferential basis @ 17 Rs per share totaling additional infusion of Rs 34 crore in the month of February 2017.
• Debt to Equity ratio is below 2 and is reasonable in nature
• The company is a regular dividend paying company and has paid dividend for past 7 consecutive years.
• Asset Turnover ratio stands at 9 times for the current year

Investment Rationale : Why to Invest in this Stock ??

• Shareholding of the promoters in the company is 39.53% as on 30th June,2017 which strongly indicates interest of promoters in growth of the company.
• Construction of two new plants is under way at Kandla and Dahej located in Gujarat. Both are likely to be operational by end of current year.
• Company is under-taking huge expansion at present and has already added 10,000 MT of annual capacity in this quarter for production of compounds.
• Ruling by National Green Tribunal dated 25th May,2017 stating directions for setting up of new standards by MOEF for use of lead in PVC would result in increased use of Organotin Stabiliser which is the strongest and eco-friendly stabiliser and would be best suited replacement for Lead based stabilier. The company feels that by this order and the subsequent banning of toxic stabiliser by the Government would open up nearly 80% of Indian PVC stabiliser market.
• Company exports to various countries of Latin America , Europe and Middle East. It has recently received a commercial order from Mexichem (Global PVC giant based out of Mexico) 
• In April 2017, Company has also received Food Grade approval for it's Tinmate (Organotin Stabilizer) from FICCI Research & Analysis Center. It could open up new avenues in food stabiliser sector in future too for the company.
• De-merger for separation of trading and manufacturing activity to maximize shareholder wealth is already under process and likely to be completed by December 2017. The promoter appears to be very genuine and are committed to creation of shareholder wealth.
• At current price of 22 Rs per share and trailing EPS of 1.30 Rs , the stock is presently trading at an attractive P/E ratio of 17.
• At a forward reasonable P/E of 30 and EPS of 2 to 4 Rs due to major expansion that will kick-off, we expect the stock price to soar higher atleast to 60 and higher levels in coming time.

Disclaimer Note: The above is not a research report but information as available on public domain and it should not be treated as a research report. Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Disclosure: It is safe to assume that I might have Vikas Ecotech Ltd  in my portfolio and hence my point of view can be biased. Readers should peform own due diligence before investing. We do not assume any responsibility or liability resulting from the use of information , judgements and opinions for Trading or Investment purposes on the Blog.