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Bodal Chemicals — The Indian Stock Story
- Current Market Price: 116.65
- Target Price: 180
The current key focus of this report is thematic investment on a speciality chemicals. Thionyl chloride is the component which is used to produce Vinyl Sulphone.1 China is the largest producer of dyes intermediates (used for dyes production), disperse dyes (end use in polyester textile segment) and azo dyes. Cheaper imports from China and competition within domestic manufacturers had impacted the profitability of Indian players till FY2013.
Chinese Factory Shutdown and VS Cycle -
Then came environmental claws on those segment and it followed with several Chinese factory shutdown giving a global supply demand imbalance. It gave Indian companies like Bodal Chemicals and Kiri Industries a huge push in export sales to fill up the demand created by absence of chinese market.2
The price of VS (Vinyl Sulphone) spiked up. As Bodal Chemicals and Kiri Industries (Well, Atul Limited too.) produce VS and the costing of raw material haven’t increased by huge margin. So the profit margin widens.
Then, Chinese market rebounded. Factories opened back. But EBITDA (Earnings before interest, taxes, depreciation, and amortization) stayed consistent rather than falling as showing that the clients didn’t sway back.
