VIKAS ECO- A POTENTIAL MULTIBAGGER!

ABOUT:-

            Vikas EcoTech Ltd. Engages in the distribution of petroleum, petrochemicals, Specialty chemical and polymer products in India. The company also manufactures various products used in plastics, rubbers (eco-friendly rubber plastic compounds) and paints.

BRIEF ABOUT COMPANY:-

            Founded in 1984, Vikas Ecotech’s history is rooted in transformation through science and innovation. Moving away from trading to manufacturing of high-end specialty chemicals. The Company’s manufacturing division has grown more than 500% in the past few years. Today, the company is a leading player in specialty chemicals exporting products to over 20 countries.

            Expanding its global area, right now the company operates in more than 20 countries, mainly in EU and USA. The company’s exports have been increasing continuously showing a growth of 126% CAGR last year… This shows that the company WON’T BE AFFECTED BY DEMONETISATION!!!

            Co was founded as a NBFC in 1984, listed in NSE and BSE in 1995. Slowly started trading and distribution of petrochemical products in 1998. Now in 2014 they Received Star Export house status after establishing export division in 2011 and then upgrading to 2star export house in 2015. In 2016 Commenced construction of state of the art manufacturing plant and Innovation (R&D) Center at Dahej, Gujarat Capacity to produce 6,000 MT of Organotin stabilizers(MTM)(growing at 20% CAGR) and 5,000 MT of special polymer compounds annually.

            Each and every product be it organotin or PVC PIPE, polymer additives or specialty chemicals the company is very well known for their products. The company has achieved almost 50% of their sales from global markets!!!

            The company’s strategy of sweating our assets is helping us increase production without a corresponding increase in capex while driving down per-unit production costs. Recently installed facilities to convert waste cooking oil into specialty additives.  Vikas Ecotech is the only homegrown manufacturer in India with an in-house R&D function, manufacturing MTM right from tin metal. Vikas Ecotech’s strides as a leading manufacturer of specialty polymer compounds continued both in the global and Indian market.

RECENT  news:-

         1)        IMPROVED CREDIT RATING:

i) Brickworks Ltd. Upgraded Vikas Eco to BBB+ from BBB-.

ii) Dun & Bradstreet, a US based information rating MNC, upgraded the company’s rating from 4A3 to 5A2.

2)    MANAGEMENT CHANGE:

i)                   GRANT THORTON was appointed as internal auditors.

ii)                 The Advisory board, first of its kind in this industry is lead by chairman, SHRI G N BAJPAI, ex-chairman of LIC and SEBI.

INDUSTRY:-

Ø AGRICULTURE

Ø AUTOMOTIVE

Ø FOOD PACKAGING

Ø FOOTWEAR

Ø HEALTH-CARE &  PHARMA

Ø INFRASTRUCTURES

Ø ORGANIC INORGAINIC CHEMICALS

Ø PLASTICS & POLYMERS

Ø RUBBERS

Ø SPECIALTY CHEMICALS

Ø TEXTILES

Ø WIRES AND CABLES

SHAREHOLDING PATTERN:-

             Promoters as on Sept 16 are holding 43.51% of the company’s shares. The company is having no pledged shares! The main promoter, VIKAS GARG’s holding is 20.32%. Highest holder among the public shareholders is Globe Capital Market Limited, holding 2.01% of the company’s holding.  FIIs holding stand at 0.05% (2 FII holders) and DIIs stand at 0.05% as of june16.

Financials and future prospects:-

FINANCIALS:-

             The company this financial year posted highest EPS over last 3 year 2014-0.33, 2015-0.15, 2016-1.00! the company is having a good financial trend reporting fab Q2, more than 100% rise in EPS. Company is having consistent profit growth of 30%+ every yea, over than last 5 years!

             Company’s operating profit per share is Rs1.93 against 0.65. the OPM, CPM NPM stands at 15.94%, 9.21%, 8.31% against 7.88%, 3.35% and 1.79%!!! Even the ROCE increased to whooping 32.03% against odd 15.46% while RONW touched 38.54% vs 8.74%, rising more than 4.5times!!!

             While revenue increased at 34% CAGR, ROE and DER stood at 98.5%, 1.45% against 8.7%, 1.56% respectively!! During the previous FY, the mix of domestic and export revenues stood at `158.18 crores and `148.97 crores respectively, a share of 51.50:48.50.

FUTURE PROSPECTS AND ESTIMATIONS:-

              In India, VIKAS ECO is focusing on penetrating the Western and Southern markets with their new plant coming up at Dahej in Gujarat. The state-of-the-art plant and innovation Centre have started its initial operations in this fiscal year and contribute to a 200% increase in capacity. This will help them to serve their local customers in a shorter time and also enable them to shorten the timelines for exports.

              With their market domination in North India continuing, they hope to create a pan-India marketing and distribution network in the next few years. They plan to export over 30 countries divided into 5 clusters i.e. EU, USA, MENA, South East Asia and African countries in coming years.

               Gujarat Capacity to produce 6,000 MT of Organotin stabilizers (MTM) will grow at 20% CAGR. The nascent CPVC (Chlorinated polyvinyl chloride) pipes and fittings market is estimated to grow at more than 100% CAGR over next 2-3 years Stated for production by early next year, it will add over 200% capacity for the company. As a move forward and with the help of information technology, the Company is planning to introduce new products in market.

               The Company is scheduling another manufacturing unit at land allotted by Gujarat Industrial Development Corporation (A Government of Gujarat undertaking) at Dehej-II, Industrial Estate, District- Bharuch (Gujarat) to cater the market of Western and Southern India and also for exports its products like Methyle Tin Mercaptile and Epoxidised Soya Bean Oil.

         

               The company expects to grow at a CAGR of 35-40% in next 2-3 year, a conservative estimate. The company has capex plans of about Rs 20-25 crore coming by over next 2 years!!!

ESTIMATIONS OF 2017:-

               The company expects revenue of 400crore in FY2017.  The company is expecting to increase its exports to 50% i.e. 200crores revenue from export. EBIDTA is expected around 40-45crores in FY2017. The company is expecting 40-45% growth compared to last year in exports. Capex of 5-10% is in their existing unit of rajasthan; rest are in Gujarat in 2 locations... Already acquired land in mundra from GIDC. This capex is of 25-35crores.

RETURNS:-

                All in all to summarize expect this stock to be a 4 bagger from reco price, 13.85 in next 2 years.

UPDATE 25th July, 2018 (CMP 21.7):-
Vikas eco already gave a 3.5x returns in less than 2years. One may invest for 50-70% returns in next few quarters.

Disc:- All the info are based on the writer's own research/gathered from public domains. The writer of this Blog is  neither any advisor nor related to any brokerage houses!! The writer might be  himself invested in the stock after his own research so the views might be biased. One must do their  own research before investing. The writer of this blog won't be held responsible for any of your profit/loss in your investment/trading career!