April 26, 2017 VISIT NOTE

Bodal Chemicals
Sensex: 30133 CMP: INR 154

Chemicals

Bodal Chemicals (BCL) is a leading manufacturer of dyes Intermediates/dyestuff and has diversified into speciality chemicals.
Company's products are used in diverse industries such as Textile, Paper, Plastic, Leather etc. Stricter environmental norms
and increased costs substantially eradicated low cost advantage of Chinese dye manufacturers. BCL with presence across
dyestuff value chain and strong domestic/exports penetration is aptly placed to take benefit of opportunities in dyestuff
industry. Company's integrated business model, robust capex plans and diversification into speciality chemicals bodes
well for growth in future.

Integrated dye manufacturer with 3% share in global market mostly cater to US market (market size ~0.3 mn MTPA) which has
BCL has integrated manufacturing plants of Basic Chemicals anti-dumping duty on Chinese products. BCL expects ~INR 2 bn
(190000 MT), Dye intermediates (30000 MT, 25+ variants) and revenue with EBITDA of ~20%+ from this venture in 2-3 years.
dyestuff (17000 MT, 150+ variants). ~45% of basic chemicals are Liquid dyestuff & LABSA
captively consumed for dye intermediates and ~40% intermediates Liquid Dyestuff is primarily used in paper industry for coloring.
are used for dyestuff manufacturing. Company has a power BCL has capacity of 10800 MTPA and expects major revenue
generation plant (1.5 MW/day) which supplies electricity to contribution from exports markets like Australia, South Africa
sulphuric acid and other plants. BCL also has in house capacities and Europe. Due to less competition, BCL expects revenue of
for effluent treatment with capacity of ~1 mn ltrs/day. In 9m FY17, ~INR 1 bn by FY20 with EBITDA margin of ~20%. BCL also has LABSA
intermediates accounted for ~60% of revenue followed by dyestuff capacity of 18000 MTPA and started production in Q1FY17. LABSA
(~25%), basic chemicals (~11%). Company exports to 45+ countries is widely used in detergent powder, cake and dish wash cleaners.
with major contribution from S. Korea (~30%) and China (~17%). Management plans to double the capacity by incurring capex of
Dyestuff capacity to expand by 24000 MTPA in 4 years INR 50 mn and expects a revenue contribution of ~INR 1 bn and
BCL plans to expand current dyestuff capacity by 8,000 MTPA to EBITDA of ~6% at optimum capacity.
~25,000 MTPA for a capex of INR 280 mn. Capacity is expected to Outlook and Valuation
be on stream by Q4FY18 and management expects incremental BCL witnessed revenue CAGR of ~20% between FY13-16 to reach
revenues of INR 1.4-1.5 bn from it. Capacity would be further INR 9100 mn in FY16 on account of muted supply from China and
expanded by ~16,000 MTPA over the next three years. To cater to increasing focus towards Indian dye manufacturers. Decline in
additional demand of intermediates, company also acquired ~70% raw material and power/fuel cost as % of sales resulted in
stake in SPS processors (INR 40.9 mn) having capacity of 3000 expansion of EBITDA margin from ~3.7% in FY13 to ~17% in FY16.
MTPA and plans to expand capacity by 4200 MTPA by Q2FY18. Company witnessed ~69% PAT CAGR between FY14-16 and reported
With increasing capacities of dyestuff, management expects ~90% healthy ROCE of ~37% in FY16. Company has managed to reduce
captive consumption of intermediates in next 2-3 years. debt from INR 3.7 bn in FY14 to INR 1.14 bn in H1FY17. Currently
Trion Chemicals - JV for speciality chemical major proportion of debt is short term foreign currency loan (LIBOR
Trion Chemicals is a JV between BCL (~42% ownership for INR 220 + ~1%). With the recent capacity expansions in dyestuff, JV for
mn) and Raj Chemicals. It has 12,000 MTPA capacity of TCCA Trion and introduction of LABSA & liquid dyestuff, management
(Trichloroisocyanuric acid) which is mainly used for disinfection has guided for incremental revenue of INR 4.5-5 bn in next 3-4
of water and as bleaching agent in the Textiles industry. Company years. Except LABSA, management expects healthy ~20%+ EBITDA
started producing TCCA from H2FY17 and has plans to increase margin in all the other segments. Company is currently trading at
capacity to ~18000 MTPA with capex of INR 200 mn. TCCA will TTM P/E of 14x.

Shareholding (%) Mar-17 Key Data (INR mn) FY13 FY14 FY15 FY16
Promoters 64.17 BSE Code 524370 Net Sales 5275 9595 10453 9100
FIIs 4.41
NSE Code BODALCHEM Growth -14.05% 81.91% 8.94% -12.95%
DIIs 0.11
Others 31.31 Bloomberg Code BODL IN EBIDTAM 3.75% 11.99% 17.61% 17.20%

Relative Price Performance Reuters Code BODA.BO Adj. PAT -231 790 918 815
220 Shares Outstanding (mn) 109.1 Growth -33.29% - 16.27% -11.29%
200
180 Face Value 2 Adj. EPS (INR) 0.00 2.76 8.41 7.76
160
Mcap (INR bn) 17.42 P/E (x) 0.00 6.85 4.01 9.44
140
120 52 Week H/L 167.75/77.10 EV/EBIDTA 17.27 4.84 3.04 5.57
100
80 2W Avg. Qty.NSE 356449 Net Debt/Equity 6.86 4.10 1.13 0.59
Apr-16

Jun-16
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Feb-17

Apr-17
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Jan-17

Mar-17

Free Float (INR Bn) 6.24 RoACE 0.00% 38.75% 38.88% 37.18%

Bodal Sensex Beta 1.22 RoAE 0.00% 151.70% 81.23% 43.97%

Amod Joshi
Amod.Joshi@spagroupindia.com 1
Ph. No. 91 22 4289 5600/ Ext. 215
 Chemicals

Quarterly Financials
Particulars (INR Mn) Q3FY17 Q2FY17 QoQ Q1FY17 Q4FY16 Q3FY16 YoY 9MFY17 9MFY16 YoY

Gross Sales 2974 3700 -19.62% 2705 2056 2216 34.21% 9667 7642 26.50%

Raw Material Costs 1722 2286 -24.68% 1665 1333 1193 44.39% 5726 4371 31.00%

Employee Expenses 163 163 0.04% 140 116 118 37.97% 465 400 16.45%

Manufacturing Expenses 217 265 -17.88% 213 156 228 -4.65% 697 725 -3.79%

Other Expenses 344 413 -16.68% 123 145 276 24.68% 1117 952 17.38%

Total expenditure 2447 3127 -21.76% 2141 1751 1815 34.81% 8006 6448 24.18%

EBITDA 528 573 -7.96% 565 305 401 31.51% 1661 1195 39.05%

EBITDAM 17.74% 15.49% 225 bps 20.87% 14.82% 18.11% -36 bps 17.18% 15.63% 155 bps

Other income 5 16 -71.39% 5 95 8 -42.68% 26 26 1.57%

Depreciation 66 64 3.32% 58 71 65 1.18% 190 187 1.45%

Interest 16 19 -17.72% 19 24 29 -46.10% 53 98 -45.49%

PBT 451 507 -11.07% 493 305 315 42.95% 1444 935 54.42%

Exceptional Item 40 0 - 0 44 0 - 40 35 13.37%

Tax 175 176 -0.43% 171 123 111 57.98% 519 330 57.27%

PAT 316 331 -4.71% 322 226 205 54.23% 965 640 50.70%

PATM 10.61% 8.95% 166 bps 11.91% 10.99% 9.23% 138 bps 9.98% 8.38% 160 bps

Equity 218 218 218 218 218 218 218

Face Value 2 2 2 2 2 2 2

EPS 2.89 3.04 2.95 2.07 1.88 8.84 5.87

% of sales

Raw Material Costs 58% 62% -389 bps 62% 65% 54% 408 bps 59% 57% 435 bps

Employee Expenses 5% 4% 107 bps 5% 6% 5% 15 bps 5% 5% -7 bps

Manufacturing expenses 12% 11% 41 bps 5% 7% 12% -89 bps 12% 12% -791 bps

Other Expenses 12% 11% 41 bps 5% 7% 12% -89 bps 12% 12% -791 bps

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 Chemicals

Financials (Consolidated)
Income Statement Balance Sheet
Y/E Mar (INR mn) FY13 FY14 FY15 FY16 Y/E Mar (INR mn) FY13 FY14 FY15 FY16
Net Sales 5275 9595 10453 9100 Share Capital 373 468 468 218
Growth -14.05% 81.91% 8.94% -12.95% Reserves and Surplus 128 430 1347 2128
Cost of Goods Sold 3736 6175 6579 5706
Total Networth 502 898 1815 2346
Employee Cost 320 380 590 516
Secured 3427 3424 2080 1396
Other Optg. Exps. 1021 1890 1443 1313
Total Optg. Exps. 5077 8445 8612 7534 Unsecured 53 292 8 33
EBIDTA (excl OI) 198 1151 1841 1566 Total Debt 3480 3717 2088 1429
Growth 482.89% 482.24% 60.03% -14.97% Deferred Tax Liability 342 92 132 175
EBITDA Margin 3.75% 11.99% 17.61% 17.20% Other Liabilities 2 1 1 0
Dep./Amortization 165 253 223 258 Sources of Funds 4326 4707 4035 3950
EBIT 33 898 1619 1308
EBIT Margin 0.62% 9.36% 15.48% 14.37%
Net Block 2651 1683 1898 1920
Interest Expense 401 469 273 122
Other Income 39 37 47 120 CWIP 3 85 33 3
EBT -329 466 1392 1305 Investments 7 7 18 16
Tax Expenses -97 164 474 445 Current Assets 1900 3970 3228 3074
PAT -232 302 918 860 Current Liabilities 748 1311 1316 1170
Minority Interest 0 0 0 0
Net Current Assets 1152 2659 1912 1904
Adjustment to PAT -1 -488 -1 45
Deferred Tax Assets 362 92 9 21
APAT -231 790 918 815
Growth -33.29% - 16.27% -11.29% Other Assets 152 181 166 86
APAT Margin -4.38% 8.23% 8.79% 8.95% Application of Funds 4326 4707 4035 3950

Key Ratios Cash Flow

Y/E Mar FY13 FY14 FY15 FY16 Y/E Mar (INR mn) FY13 FY14 FY15 FY16
Per Share Data (INR) EBT (329) 466 1,392 1,305
Reported EPS -2.10 2.70 8.40 7.80
Less: Other Income/Exceptionals (9) 710 60 (141)
CEPS -0.60 5.00 10.40 10.20
Add:Depreciation 165 253 223 258
DPS 0.00 0.00 0.00 0.60
BVPS 3.18 5.94 14.34 21.50 Add: Interest paid 402 456 263 106
Return Ratios (%) Direct taxes paid (1) (155) (399) (358)
RoACE 0 38.75 38.88 37.18 Change in Working Capital (85) (1,238) 439 142
RoANW 0 151.7 81.23 43.97
Cash Flow from operations (a) 143 492 1,977 1,312
Liquidity Ratios
Change in Fixed Assets (33) (15) (436) (270)
Net Debt/Equity 6.86 4.10 1.13 0.59
Interest Coverage Ratio 0.18 3.57 6.10 11.70 Change in CWIP 14 (83) 52 31
Current Ratio 0.86 1.25 1.30 1.16 Change in Investments - 0 (10) 2
Quick Ratio 1.71 2.10 1.86 1.86 Others (4) (83) 39 16
Efficiency Ratios Cash Flow from Investing (b) (23) (166) (353) (226)
Asset Turnover Ratio 1.37 2.32 2.56 2.45
Change in Equity 155 95 - -
Inventory Days 39 43 25 33
Debt Raised/(Repaid) 33 237 (1,630) (660)
Debtor Days 57 80 64 61
Creditor Days 44 40 37 41 Dividend paid - (0) (0) (78)
Valuation Ratios Interest paid (402) (469) (273) (122)
P/E (x) -2.78 6.84 4.01 9.29 Others 83 (180) 270 (250)
P/BV (x) 1.86 3.18 2.35 3.41 Cash Flow from Financing (c ) (131) (321) (1,621) (1,094)
P/CEPS (x) -9.65 3.72 3.23 7.15
Net Change in Cash (a+b+c) (12) 5 2 (7)
Dividend Yield (%) 0.00 0.00 0.00 0.82
Opening Cash 16 4 10 12
EV/Net Sales (x) 0.77 0.60 0.55 1.03
EV/EBIDTA (x) 17.27 4.84 3.04 5.57 Closing Cash 4 10 12 5

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Sharad Avasthi Head - Equity Research sharad.avasthi@spagroupindia.com Tel.: +91-022-4289 5600 Ext.635

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