Low Priced Scrip

Dalal Street Investment Journal - - CONTENTS -

Al­kali Met­als Lim­ited (AML), in­cor­po­rated in 1968, is a well-known name in chem­i­cal in­dus­try. The com­pany man­u­fac­tures prod­ucts rang­ing from al­kali metal deriva­tives, amino pyridines, tetra­zoles, cyclic com­pounds and fine chem­i­cals. Its prod­ucts are sold to phar­ma­ceu­ti­cal and chem­i­cal com­pa­nies for fur­ther pro­cess­ing and con­ver­sion into bulk drugs or any other form of end use. The com­pany has three man­u­fac­tur­ing units: Up­pal (Unit I), Dom­mara Pocham­pally (Unit II) and JNPC, Visakha­p­at­nam (Unit III). The com­pany con­verted its Unit-1 into R&D fa­cil­ity and it is ap­proved as an "in-house R&D fa­cil­ity" by the Min­istry of Sci­ence & Tech­nol­ogy, Gov­ern­ment of In­dia.

In­dus­try Over­view: The In­dian chem­i­cal in­dus­try is the third largest in Asia and sixth largest in the world. In­dian chem­i­cal in­dus­try is ex­pected to dou­ble its share in the global chem­i­cal in­dus­try to 5-6 per cent by 2021. Also, the In­dian spe­cialty chem­i­cal in­dus­try is ex­pected to reach USD 70 bil­lion by 2020. A num­ber of MNCS are fo­cus­ing on In­dia for their man­u­fac­tur­ing hub due to lower cost of labour, avail­abil­ity of key raw ma­te­ri­als and large con­sumer mar­kets. The In­dian gov­ern­ment is plan­ning to in­cen­tivize the chem­i­cal units set up with new tech­nol­ogy ca­ter­ing to ex­port mar­kets to give boost to ex­ports and, in turn, re­duc­ing the cur­rent ac­count deficit.

Well-es­tab­lished Cus­tomer Base: AML caters to the prod­uct re­quire­ments of both the do­mes­tic as well as in­ter­na­tional mar­kets. Its ma­jor do­mes­tic cus­tomers are Ral­lis In­dia, Gran­ules In­dia, Porus Drugs & In­ter­me­di­ates, Dr. Reddy’s Lab, Pun­jab Chem­i­cals, TEVA API In­dia, and Al­lied Chem­i­cals. AML’S in­ter­na­tional clients in­clude All­win Asia Lim­ited, Ni­hon Siber­heg­ner K.K, No­vasep Synth­ea­sis, Eu­ti­cals S.P.A and Teva Pan­tex Chem­i­cals

The com­pany sold 1443 MT of fin­ished prod­ucts dur­ing 2016-17 as against 1610 MT in the pre­vi­ous fi­nan­cial year. AML is plan­ning to ex­pand and di­ver­sify the range of prod­ucts in the com­ing years which will in turn in­crease the turnover and mar­gins.

On the fi­nan­cial front, Al­kali Met­als Lim­ited posted a 5.70 per cent rise in its rev­enue to ₹15.53 crore in the first quar­ter of FY18 from ₹14.69 crore in the same quar­ter of the pre­vi­ous year. The com­pany’s PBIDT slumped by a mar­ginal 0.65 per cent to ₹1.67 crore in Q1FY18. The com­pany recorded a net profit of ₹0.26 crore in Q1FY18, up by 16.30 per cent on a yearly ba­sis.

On an an­nual ba­sis, the com­pany posted a 20.77 per cent drop in its rev­enue to ₹58.06 crore in FY17 as against the rev­enue in pre­vi­ous fis­cal. The PBIDT of the com­pany de­clined 30.82 per cent to ₹6.87 crore in FY17 com­pared to FY16.

Fu­ture de­mand for spe­cialty and fine chem­i­cals is ex­pected to grow at a good pace. AML has well-es­tab­lished in­fra­struc­ture, in-house R&D ca­pa­bil­i­ties and re­puted cus­tomer base. The com­pany ex­pects to com­mer­cial­ize some R&D prod­ucts and fur­ther im­ple­ment var­i­ous mar­ket­ing strate­gies to counter the com­pe­ti­tion and in­crease its topline and bot­tom­line. Con­sid­er­ing all th­ese, we rec­om­mend our reader-in­vestors to BUY this stock.

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