Daikaffil Chemicals India Limited : A good small pick at CMP Rs 23-25 Long term 1-2 year Target Rs 40

About Company:  DAIKAFFIL CHEMICALS INDIA LIMITED is a chemical manufacturing Company established in 1992 in technical collaboration with Japanese.

DAIKAFFIL has setup a modern plant at Tarapur near Mumbai with Japanese Collaboration having forward integration production facilities from PNTSA, DNS, DAS, DHS to various OBA's under one roof. The present production including Intermediates is exported to USA, Europe and South East Asian countries. Installed capacity of various OBA's is around 2000MT per annum including few important Intermediates covering Carboxylic acid and Carbon Amides, used for Pigments which are manufactured exclusively for the overseas market. Clientele includes established names in the industry like Clariant, KIWA, ERCA spa, DAIKA (Japan) and many more.

Future Outlook: The Global chemicals market is estimated at about USD 3.4 trillion and majority of the chemical industry is shifting base to ASIA which has led to share of ASIA in the global chemical industry increasing from 31% to 45%.With ASIA `s increasing contribution to the chemical industry, India emerges as one of the focus destinations for chemical companies worldwide. The total market size of the Indian chemicals sector is to increase from USD 108 billion to USD 290 billion within the next 5 years. The Indian chemical industry formed the backbone of the industrial development of India. Hence the Chemicals industries contribution to the GPD is forecasted to be increase substantially by developing a large domestic market through low cost production.

India has emerged as a global supplier of Optical brighteners. There has been a remarkable growth in the exports of optical brighteners during the last 5 years and the industry has achieved a growth of almost 14.5 % per annum. The ability of companies to comply with global regulations and Indias manufacturing competitiveness has helped the export growth significantly.

Interestingly HGE Chemical SA,Luxemburg hold 12.5% stake in the company.

Financial Performance:

in Cr.)	2015	2014	2013	2012	2011
Revenue	34.45	33.38	29.97	21.41	19.21
Other Income	-0.15	0.31	0.44	--	0.43
Total Income	34.31	33.69	30.41	21.41	19.64
Expenditure	-31.53	-30.48	-28.06	-20.51	-17.76
Interest	-0.21	-0.31	-0.3	-0.25	-0.11
PBDT	2.57	2.9	2.05	0.65	1.77
Depreciation	-0.42	-0.61	-0.56	-0.48	-0.39
PBT	2.16	2.29	1.49	0.17	1.38
Tax	-0.6	-0.86	-0.51	-0.06	-0.42
Net Profit	1.55	1.44	0.98	0.11	0.96
Equity	6	6	6	6	6
EPS	2.59	2.39	--	--	1.61
CEPS	3.28	3.41	2.56	0.98	2.25
OPM %	8.07	9.63	7.84	4.2	9.76
NPM %	4.5	4.3	3.25	0.51	5
Dividend	8%	5%	5%	8%	8%

 

Company has been consistently paying dividend in last 5 years this year it has declared 8% dividend. It is encouraging to see NP margin has improved year on year basis

Stock is available at PE multiple of 9 going forward with improving margin and increase in demand company can further improve financial performance and in a good position to deliver EPS of 3.5-4 in next 2 years .Stock can touch price of Rs 40 in 2 years .Currently available at CMP of Rs 23-24 with  Rs 0.80 dividend. If stock is acquired and held for 15 month(Dividend normally is received in Sept)  investor could earn 2 dividends that could result in tax-free dividend yield of 6% plus capital appreciation. A good pick at current level for long term investors.