Ishan Dyes & Chemicals 531109 : Buy at CMP of Rs 50-51 one year Target Rs 75

Ishan Dyes and Chemicals is 22 years old company in chemical sector manufacturing Copper Phthalocyanine Blue CPC-Blue and related Pigments. Company has current capacity of 2400MT and it has plans to double the capacity in next 2 years. 40% of revenue comes from exports.

Company is consistent profit making company for last 5 years and recently issued bonus shares in February in 1: 2 ratio and currently offered buy back @ Rs 50.55 to increase promoter stake which before buy back was around 25%.

Clients: Company has some very reputed MNC chemical companies as customers which speaks about product quality and assured sales.

1.       Clariant

2.       CIBA

3.       Heubach

4.       Lanxess

5.       Pyosa

Financial Performance

	2017	2016	2015	2014	2012
Revenue	67.89	62.64	50.49	75.33	67.81
Other Income	--	--	-0.48	--	--
Total Income	67.89	62.64	50.01	75.33	67.81
Expenditure	-56.51	-55.09	-47.44	-65.68	-58.57
Interest	--	-0.91	--	-0.52	-1.35
PBDT	9.83	6.63	2.56	9.13	7.9
Depreciation	--	-1.41	-1.07	-2.08	-2.01
PBT	9.83	5.23	1.5	7.04	5.89
Tax	-4.22	-1.33	0.69	-0.64	-1.1
Net Profit	5.6	3.89	2.17	6.4	4.72
Equity	11.27	7.51	7.51	7.51	7.51
EPS	4.97	5.17	2.88	8.52	6.29
%OPM	14.47	12.05	5.08	12.81	13.63
%NPM	8.25	6.2	4.29	8.49	6.96

Target Price : Company is planning to double the capacity in next 2 years to meet the increasing demand with softening of crude oil prices the margins have seen increase. With current open offer at Rs 50.55 by promoter it shows that promoters are confident about improvement in future financials of the company. If company delivers what it plans and doubles there production and sales then stock can get re-rating.

At CMP of Rs 50.20 stock is available at PE multiple of approx 10 .Current market Cap of approx 56 Crores which is approx 0.85 times sales which is  attractive. Improvement in top line and increase in margins should help to improve results in next 2 years. With conservative EPS of 6 and PE multiple of 12 stock can touch Rs 75 in one year and similar performance continues it has potential to touch 100 in 2 years time.

With very little down risk Long term investors may start accumulating this stock at CMP of Rs 50.20 with targets of Rs 75 and Rs 100+.