Paushak Limited Stock Analysis

a) Company’s Overview

(i) PAUSHAK is engaged in the manufacturing of Phosgene based specialty intermediates and is India’s largest phosgene based specialty chemicals manufacturer addressing the needs of Pharmaceutical, Agrochemical and Performance industries.

(ii) Global Phosgene Market is substantially large with very limited participation from India due to the regulatory constraints where major end-use has been performance applications and have been dominated by Chinese and European manufacturers. Although Global Phosgene production is estimated to be more than a couple of million tons, specialty segment servicing pharmaceutical and agrochemicals industries is around 5% only which is expected to grow at a rate of 5-6% per year in next few years.

(iii) Paushak sees a huge opportunity for itself and is focussing to grow as a niche specialty chemical player in global arena while offering an “India alternative” to global customers. The Company has been focussing to enhance the capacities for existing products while working with global majors for their requirements, including contract manufacturing, to take the business forward.

b) Financial Performance

1. Assets and Liabilities Key Parameters
Year Asset(lacs) Liabilities(lacs) Net Worth(lacs) Book Value D/E (<2) RONW Receivable days
FY16 8,870.02 1,439.13 7,430.89 231.70 0.19 17% 94
FY17 9,428.12 1,126.29 8,301.83 258.86 0.14 13% 77
FY18 14,441.90 3,128.93 11,312.97 352.75 0.28 19% 131
2. Profit n Loss Key Parameters
Year Revenue(lacs) PAT(lacs) EBITDA Margins Profit Margins Outstanding Shares(lacs) EPS
FY16 8,060.38 1,241.82 24.2% 15.4% 32.071 38.72
FY17 7,741.78 1,094.24 22.5% 14.1% 32.071 34.12
FY18 10,786.48 2,147.08 30.0% 19.9% 32.071 66.95

3. Cash Flow Statement(all figures in lacs)

Particulars FY18 FY17 FY16
(i) Net Cash Generated from Operation 1,048.33 1,243.60 1,353.59
(ii) Net Cash Generated from Investment -982.41 -1,081.42 -1,262.91
(iii) Net Cash Generated from Financing Activity -60.29 -163.44 -83.8
(iv) Total[ (i)+(ii)+(iii) ] 5.63 -1.26 6.88
(v) Cash and Cash Equivalents at the Beginning of the Year 37.64 38.9 32.02
(vi) Cash and Cash Equivalents at the end of the Year 43.27 37.64 38.90

Source: Annual Report of FY17 and FY18 of Paushak Limited

Key Notes

1) The Company has shown a Revenue growth of 15.68% in last 3 years.
2) The Company has shown a PAT growth of 31.53% in last 3 years.
3) TTM[EPS]= 100.26
4)  P/E=22.34[ At CMP of 2240 on 17.08.2018]. Industry P/E=37.
5) P/B=6.35[ At CMP of 2240 on 17.08.2018].
6) The Company is debt free. D/E=0.28
7) The Company has excellent ROCE of 25% in FY18.
8) The Company has generated positive cash flow from operations in the last 3 years.
9)  No equity Dilution in the last 3 years. The Company in the month of May 2018 has done a buyback of around 1,25,000 Shares from the market at 1700 price. This will further increase EPS of the company going forward.
10) Mcap/Sales=6.71( on the higher side). The Company has M.Cap of 718 Cr and Sales on 107 Cr in FY18.
11) The Company is having a good dividend payout history. In FY18 they have given 30% dividend on FV=10.

c) Shareholding Pattern

(i)As on March ’18, the company has total outstanding shares of only 32,07,114 Shares.
(ii) Promoters=  21,38,479 No. of Equity Shares[66%]
(iii) Public=  10,68,635 No. of Equity Shares [33%]
(iv) Alembic Limited a Pharmaceuticals company holding 6,10,615 no. of Equity Share.(20%)
(v) Individuals
<1 Lacs value holding= 7,51,081 no. of Equity Shares
>1 Lacs value holding= 1,41,438 no. of Equity Shares.

Conclusion: The Company’s valuation is reasonable and the growth prospect is looking quite strong. The company is almost debt free and having good EBITDA margins of 30% and high ROCE of 25% in FY18. In fact, many chemicals companies are showing strong results this year. In Q1FY19, the company has posted an EPS of 45 which was 66 in FY18.

    **************Quarterly Result Update******************
    June 2017
    (i) Revenue= 18.61 Cr
    (ii) PAT=3.81 Cr
    (iii) Equity Shares=32.1 Lacs
    (iv) EPS=11.86

    June 2018
    (i) Revenue= 30.49Cr[ YoY growth of 63%]
    (ii) PAT=14.34 Cr[YoY growth of 276%]
    (iii) Equity Shares=30.8 Lacs
    (iv) EPS=46.55
    If You observed that no. of shares have gone down from 32.1 Lacs on June 17 to 30.8 on June 18 as the company has done a buyback of nearly 1,25,000 Equity Shares in the Month of May 2018. This will further improve the EPS.

    I couldn’t find this company’s name either in NSE or BSE website.
    What is the company code in BSE and NSE ?

    Paushak produces Phosgene and its derivatives. The other companies into this are Atul Ltd and BASF. Atul is the only other Indian company licensed to produce phosgene. This is a moat for it. Other companies can’t just jump in to compete with them. Phosgene being a hazardous chemical/gas is heavily regulated. After trying for several years, Paushak received approval from the Ministry of Environment and the Ministry of Industries for expansion of capacity from 150 tonnes per month to 400 tonnes per month. Paushak had applied for 5000 tonnes per year but received approval for 4800 tonnes