Vikas Ecotech: Value migration : New Generation Compounds
After writing this analysis i came to know about lot of RED flags in the balance sheet ,trade receivable which are approx 50% of the yearly sales are further increasing with growth in sales, the erratic movement in stock price is suspicious.
Due to these reasons am hereby cancelling my investment call of Vikas Ecotech.
If company shows some improvement in nos and corp governance i will review it.
VEL is in Specialty chemical business with focus on R& D and development of
new generation compounds which can be a game changer for the company's
growth.
In 1972
The company, which started as agent for Reliance, srf, gnfc, Nirma and
other mncs like Mitsui of Japan, Arkema of France backward-integrated into
manufacturing in 2003, has been making high-end products, used in the
manufacture of agriculture and infrastructure components, wires & cables,
auto parts, textiles, electronic goods, medical, writing instruments, as also
organic & inorganic chemicals.
The company has
been exporting its products to 20 countries, including Bangladesh, Pakistan,
Sri Lanka, China, the UAE, Turkey, Spain, Singapore, Germany, Vietnam,
Turkmenistan, Egypt, Tunisia, and Ukraine, among others.
Impressive
client list -
The client list includes lot of consumer companies growing at scorching pace
so VEL can grow with them .
Client list Includes
some renowned names such as RR Kabel, Relaxo Footwear, Liberty Shoes, Escorts,
kei Industries, Havells India, Action International, Apollo Pipes and srf.”
Game changer
Compound - MTM - Methly tin mercaptide
Lead
contamination due to pvc pipes is one of the major contributing factors to
ground water pollution in India”. To solve the problem, Mr Vikas Garg MD of VEL advocates a ban on
the use of toxic materials like lead, barium and cadmium-based heat stabilisers
in pvc processing. Garg recommends pushing for toxin-free stabilisers,
such as organotin, which means use of methyl tin mercaptide (mtm) stabilisers,
which are lead-free, non-toxic, safe and ecofriendly.
This material
is sanctioned by most international legislations, as in the US and European
countries, for potable water pipes and fittings.
Even China’s
pvc pipe-makers are under pressure to give up lead stabilisers. In India, while
there is no legislative mandate to phase out lead-based heat stabilisers, the
National Green Tribunal is pushing for one.
Vikas
Ecotech Ltd has signed an MoU with Czech
Republic based Nafigate Corporation for technology to convert waste cooking oil in to biopolymerPHA (polyhydroxyalkanoate).
As per the agreement, Nafigate will transfer Hydal technology, which is a
process to convert waste cooking oil into PHA biopolymer by means of
fermentation and subsequent PHA polymer isolation, to Vikas Ecotech.
VEL even
have a tie-up with Haldiram Ethnic Foods for supply of their used oil.
More details about his can be found here -
http://www.business-standard.com/content/b2b-plastics-polymers/vikas-ecotech-to-produce-bio-plastics-from-waste-cooking-oil-116060700138_1.html#
Commencement of New Manufacturing plant at Dahej-
Vikas EcoTech Ltd, has commenced the construction of phase I of its manufacturing plant
and innovation center at Dahej, Gujarat. To be built with an investment of Rs
30 crores, the plant will produce 6,000 MT of organotin stabilisers (methyl tin
mercaptide or MTM) and 5,000 MT of specialty polymer compounds
annually.
Imp Triggers-
1. Long term
customer of the company and owner of 1100 crore turnover PVC pipe manufacturer
Prince pipes and fittings pvt ltd Mr jayant chhedda bougth 2.5 % stake in the
company for 8.5 crores.
To felicitate the transaction the promoters of VEL have sold their stake to Mr chheda .
Mr chheda is
another success story and is a very dyanamic person he has taken
his business from 400 crores to 1100 crores turnover in the last 4
years . Mr chheda
buying the stake in Vikas Ecotech validates the story in the long term.
2. Promoters have increased thier stake in the company by 6% in Jan -March 2016 and have committed to further increase the stake.
3. Merrill
Lynch Capital bought 1.9m shares at Rs. 20.25 in Feb-16.
4. Company is growing at scorching pace, revenue growth this year is 47%. Net
profit
grew at 574%
5.In a Recent
management guidance Mr vikas Garg have said that the company will grow
at CAGR of 35-40% for next 3 years and maintain the margin of
22%
Conclusion-
Presence in high growth sector with margin expansion, Supplying to Customers in high growth consumption sector, Coming up of New plant at Dahej in next 12 months and the expected Growth due to entry into new Generation compounds can fuel the growth for the company in next 2-3 years.
Vikas Ecotech can be a high potential medium to long term BET.
