Recommendation from MOVING TOWARDS PROFITABILITY

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

MOVING TOWARDS PROFITABILITY 

HERE IS WHY
✓ Indian hospitality industry to grow manifold
✓ Ambitious growth plans to capitalise on this trend
✓ Well-positioned for maximising returns

The Indian chemical industry is crucial for India’s economic growth and is set to contribute around USD 1 trillion by 2040. With a market value of USD 220 billion currently and a CAGR of 9.3 per cent, the industry is expected to contribute significantly to India’s goal of becoming a USD 30 trillion economy by 2047. The industry’s growth is expected to be driven by the growth of domestic chemical consumption in India and the country’s aspirations to develop a self-reliant India. Considering this, our low-price recommendation for this issue is Camlin Fine Sciences (CFS). 

CFS, a pioneer in Indian art and stationery, has diversified into pharmaceuticals and fine chemicals. The company, which was de-merged into Camlin Fine Chemicals in 2006, is now engaged in the business of specialty chemicals. Its business verticals include shelf-life solutions, performance chemicals, aroma ingredients, and health and wellness products. It produces traditional antioxidants like Tertiary Butyl Hydroquinone (TBHQ), Butyl Hydroxyanisole (BHA), and Ascorbyl Palmitate (ASP), and sells 200+ custom formulations. 

The company has a global footprint, with a customer base in 160 countries and a sales network in 80+ countries. In Q3FY25, on a consolidated basis, the net sales of the company increased by 12.34 per cent to ₹433.49 crore as compared to ₹385.89, and on a sequential basis its net sales increased by 2.49 per cent. 

Its net profit stood at ₹-5.62 crore compared to ₹-14.28 crore, a YoY increase of 60.63 per cent, while sequentially increasing by 95.18 per cent from ₹-116.61 crore. The company is poised for significant growth, fuelled by a confluence of positive factors. The management is optimistic about the stabilising economic climate and anticipates improved business performance, particularly with the strategic expansion of the Vanillin portfolio and the accretive Vitafor acquisition, expected to bolster the blends segment. 

The company’s operational efficiency is also improving, as evidenced by the increased production output to 600 metric tonnes and the projected 70 per cent capacity utilisation at the Dahej plant by the year-end. The blends business, especially in the Americas, demonstrates robust performance. Coupled with the successful completion of a rights issue and plans for debt reduction, the company’s financial health is strengthening. 

A key driver for CFS’ potential turnaround is the consistent growth in sales and diminishing losses, signalling a possible return to profitability. Furthermore, the strategic acquisition of Vinpai, worth Euro 3.3 million, promises to accelerate the global deployment of natural solutions by leveraging the company’s commercial strength and global reach. Reinforcing this positive outlook is the increasing stake held by promoters, foreign institutional investors, and domestic institutional investors. 

This reflects their confidence in the company’s future trajectory. This comes at a time when foreign institutional investors are continuously selling domestic equity. In terms of the trailing 12 months (TTM), the stock is priced higher than its industry peers, with a PBV of 3.87 times versus 2.79 times. The company shows healthy short-term liquidity with a 1.20 times current ratio, but its 1.11 times debt-to-equity ratio signals a considerable reliance on debt. Considering the aforementioned factors, we recommend BUY.