Hello Readers

Hope Everyone is doing fine. In my one of the older articles: http://theequitybull.blogspot.in/2016/12/investment-idea-3-bodal-chemicals.html , I had mentioned about the bullishness of the chemical sector after several manufacturing units being shut in China. My Next Investment destination belongs to the same sector, BHAGERIA INDUSTRIES LIMITED a small cap company which is making all the right buzz.

The Company:

BHAGERIA INDUSTRIES LIMITED was established in 1989 with an objective to serve the dyes & intermediates industry all over the globe. Company commenced its operations by setting up a Vinyl Sulphone Plant at Vapi (Gujarat) with capacity of 540 T.P.A. which has now expanded to 3600 T.P.A. Subsequently Company has gone for further expansion in other Dyes intermediates & Dyestuffs.

Vinyl Sulphone, its key product have seen a huge surge in its prices since last year, expanding its margins and profitability, the price out performance is expected to remain in current year too.

Fundamental View:

  1. The Company has performed exceptionally well on revenue front this year. Its gross revenue has picked up from Rs.256 Cr in fiscal ending 2016 to 345 Cr this year, a growth of around 35 % which indicates it has been able to grab the market share being released after shut downs in China.
  2. The Net Profit too has been three fold as compared to the previous fiscal, indicating the company has been able to expand its margin along with the rise in revenue.
  3. ROE & ROCE has been phenomenal this year being 20% & 17% respectively, which are much higher than its peers.
  4. The company works on healthy operating profit margin of 11.11 %, which again is at par with large players in the industry
  5. With a Debt Equity Ratio of around 0.08 :1 it can be said as a very safe bet, Moreover the P.E ratio currently is 11 which is just half of the industry P.E.
  6. Promoters too seem to be confident about their business, the same being reflected in the increasing promoters shareholding QoQ as shown below :
  7. Moreover, another very positive news is about its merger with Nupur Chemicals, which is gonna further expand its top-line & bottom-line, also the management depicts prices of Vinyl Sulphone (It’s key product ) to be stable. Do have a look at this recent Interview: http://www.moneycontrol.com/news/business/earnings-business/merger-with-nupur-will-lead-to-better-performance-for-bhageria-says-chairman-2275321.html

Technical View
  1. Although the charts signals bearishness on short to medium term but the stock is very near to its strong support, levels of 284 has been a good support as shown below. This makes risk to reward ratio very favorable
  2. Another near term support is its 200 DMA around Rs 304.
  3. Moreover, the recent downtrend is backed by very low volumes, indicating it would not sustain for long and trend reversal therefore is not a major issue.
Concluding Decision

Short term downfalls are where big investors find opportunities in the bull market. Bhageria has been an out performer all over, The downfall therefore should not be worried about, At CMP of Rs 307 with a stop of Rs. 284 one should take it as an opportunity like the contrarian investors do.

Best Wishes For Your Investment !!!

Thanks !!!

Note: The Above is just a information available in public domain and therefore, should not be taken as a research report.

Registration status with SEBI:  I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Disclosure : I do not have any holding directly/indirectly in Bhageria Industries Limited.

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