Is this stock going to become a multibagger from speciality chemical sector ? Here is the full details.
The indian chemical sector stocks grown immensely over the last couple of years. though there is big potential to grow a lot in future. the trend that currently running in speciality chemical stocks in India is not a short term trend, it has the long way to go. As chinese companies had shut down their operations and production of chemicals due to high pollution and also the world is looking for China plus One, with the China plus One theme India is looking as a very good alternative to the china. this scenario will be helpful to the Indian chemical sector and also there will be priority for the companies, which they manufacture eco friendly and green chemicals. One such company is there India, that to with geat potential, The company name is Rossari Biotech Ltd.
Company Overview :
Rossari Biotech Ltd was found in 2003, as a partnership firm in the name of Rossari Labtech by Mr. Edward Waiter. This company majorly operates in three categories, They are Home – Personal Care and Performance Chemicals, Textile Speciality Chemicals and Animal Health and Nutrition Chemicals. In the segment of Home & Personal Care.
Their chemicals will be used in the manufacturing of various products sucha as Soaps & Detergents, Inks, Paints & coatings, Ceramics & Tiles, Pulp & Paper, Cement, Water treatment and as a Performance additives.
In the segment of Textile Chemicals, this company serving their applications to the manufactures of Cotton, Silk, Polyester, Nylon and Printings segments. In the segment of Animal Health & Nutrition their products will be used in Poultry Nutrition and Pet care, it includes such as Pet shampoos, Pet food and etc.
Also this speciality chemicals sector company is focusing on sustainable Chemicals, which are eco friendly and no harmful chemicals, as there is higher acceptance and emand for these sustainable chemicals. also there is great support from Indian government for indian manufacturers by launching the scheme of Aatma Nirbhar Bharat and announcing PLIs, it means Performance Linked Incentives.
This company has great product portfolio and strong customer network along with great distributor network.
Rossari Biotech is growing both organically and in organically as this company acquired two chemical companies. in june 2021, Rossari acquired UNITOP chemicals for 421 cr rupees, which is a leading supplier of surfactants and speciality chemicals across the world. also acquired Tristar Intermediates for around 120 cr, which is in the business of preservatives, aromatic chemicals and home & personal care additives with hi tech distillary facilities. these both acquisitions will help Rossari Biotech to grow quickly. This company has a total capacity of 2.5 MTPA also this company is going to launch new products in coming years.
This stock would become the next multibagger Stock from Speciality Chemical stocks in india.
Key Strengths & Growth Drivers of this speciality chemicals sector stock:
The global speciality chemical industry is expected to grow at a CAGR of 6.4%, to reach 1.2 trillion by 2025. however the indian chemical sector is growing rapidly. it has grown from 18 billion in 2014 to 32 billion by 2019 at a CAGR of 11.7%. and it is expected to grow at a CAGR of 12.4% to reach 64 billion by 2025
1. Sustainability in products they manufactures, which, not harmful for environment
2. Well diversified portfolio that covers across the industries such as Home, Personal, Textile, animal and many more.
3. This company is having strong R&D capability as it’s key driver for their wide range of product mix.
4. The company has wide range of distributor network, that reaches customers earlier and creates competitive advantage.
5. Huge demand was created for the chemical manufacturers as chinese shut down
6. Govt. of India supporting well, that can improves the stability in the business.
7. Increased focus & demand on premium products that are eco friendly and natural products.’
8. Strong demand from rural sector in end industries such as agriculture, home & personal care and etc.
9. Created awareness about hygiene and importance of health, towards to be fit.
10. There is raising demand in Animal health & Nutrition as increased adoption of Pets and raising awareness about Pet care.
Key Risks :
1. There will be competition risk as there is strong players in Textile Chemical segment (Aarti Drugs) and in Personal Care (Galaxy Surfactants)
2. The chemical industry is having demand risk. if economies face the slow down automatically the manufacturing industry will get slow down.
3. Highly dependents on demand that comes from globally.
4. The profitability may get affected by the cost of raw materials.
Financials :
Rossari Biotech Ltd has the Market cap of 8000 cr, as it’s a small cap company. this company has been delivering an immense growth in both revenues and profits over the last five years. if you look at the return ratios of the company, the ROE is 30.1%, ROCE is 36.0% and the Net profit margin is 11.4%. which is again a very good sign that company is growing.
If you look at the share holding pattern of the company, Promoters are holding 68.6%, FIIs are holding 8.46% and DIIs are holding 12.9%. FIIs and DIIs are gradually increasing their stake in this stock over the last few quarters. Rossari Biotech is a debt free company and continuously generating positive cash flows from it’s operations. This stock is currently trading around 1400 region.
Conclusion :
Rossari BIotech Ltd is a strong speciality chemical sect of r stocks in india and it’s very strong financially and fundamentally. this stock is currently trading at higher valuations, though we can look into this company for long term, not for short term as we may not see big jump upwards in very short term.
It would be better that to enter into this stock periodically, it means in multiple tranches. this stock might generates multiple returns in the long term. also recommend that we should follow the buy on dips strategy in this speciality chemical sector stock. we are seeing 1300, 1150 and 975 as important support levels to add further in the corrections.
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Disclaimer : The above all recommendations are from the individuals, working for ICICI Securities. please do your own research before investing else take an advice from your financial advisor.