20 Mi­crons Ltd

Money Times - - Bull’s Eye -

(BSE Code: 533022) (CMP: Rs.42.95) (FV: Rs.5)

By Pratit Nayan Pa­tel Com­pany Back­ground:

In­cor­po­rated in 1987, Bar­oda-based 20 Mi­crons Ltd pro­duces and trades in in­dus­trial min­er­als. It of­fers mi­cronized min­er­als in­clud­ing cal­cined clay/cal­cined kaolin, China clay/kaolin, nat­u­ral re­dox­ide, nat­u­ral sil­ica, nat­u­ral mica, nat­u­ral baryte, nat­u­ral ground cal­cium car­bon­ate, nat­u­ral talc and nepheline synite/feldspar. It also pro­vides spe­cial­ity chem­i­cals such as white pig­ment and high per­for­mance opaci­fier, syn­thetic alu­minum sil­i­cate, flat­ting/mat­ting amour­phous alu­mino sil­i­cate, spe­cial­ity mat­ting sil­ica, in­or­ganic wa­ter base thick­ener, sub-mi­cron cal­cium car­bon­ate, flame re­tar­dant and smoke sup­pres­sant, poly­eth­yl­ene wax, ul­tra­fine nat­u­ral sil­ica, etc. In FY18, it de­vel­oped var­i­ous in­no­va­tive prod­ucts like LC 460 Pig­ments, AR Mica T/50T, FMSIL 410 Plus, 212 Plus, 312 Plus, Riobent 70T/70Tb, Riobent 120, ALFR GR 30/60, SYNSIL 40T/60T, Clay­white E, Hyper­max 0425, Hyper­cilite, Hyper MP 33, Me­takrete, Flow Wax, etc. Its prod­ucts find ap­pli­ca­tion in var­i­ous in­dus­tries like tex­tiles, plas­tic, rub­ber, ad­he­sive, paint, pa­per, print­ing ink and agro-chem­i­cal. It ex­ports to ~56 coun­tries.

Fi­nan­cials: 20 Mi­crons has an eq­uity cap­i­tal of Rs.17.64 crore sup­ported by re­serves of Rs.125.81 crore. The pro­mot­ers hold 43.85% of the eq­uity cap­i­tal, which leaves 56.15% stake with the in­vest­ing pub­lic. The pro­mot­ers in­creased their stake by 0.49% in Q2FY19, which is pos­i­tive sign. With a share book value of Rs.40.83, its P/BV ra­tio stands at just 1.05x.

Per­for­mance Re­view: Dur­ing Q2FY19, 20 Mi­crons re­ported 23% higher PAT of Rs.5.46 crore on 11% higher sales of Rs.108.11 crore with an EPS of Rs.1.55. Dur­ing H1FY19, it re­ported 58% higher PAT of Rs.11.95 crore on 11% higher sales of Rs.215.94 crore with an EPS of Rs.3.39. It paid a div­i­dend for FY18

(15%) af­ter four years (10% div­i­dend for FY13).

In­dus­try Over­view: The Ra­jasthan gov­ern­ment has taken ef­fec­tive steps in mon­i­tor­ing the move­ment of min­er­als within and out­side the state to re­strict il­le­gal min­eral trans­porta­tion, which has led to an in­crease in raw ma­te­rial costs. Last year, the Ra­jasthan gov­ern­ment took some crit­i­cal ac­tions against mines that op­er­ate with­out En­vi­ron­men­tal Clear­ance (EC) li­censes, which led to clo­sure of many mines caus­ing price es­ca­la­tions. How­ever, the de­mand-sup­ply gap has sta­bi­lized this year. The in­dus­trial min­er­als sec­tor plays an im­por­tant role in the In­dian econ­omy. The min­ing sec­tor has been reel­ing for a few years now un­der a lethal mix of high bor­row­ing costs on one hand and en­vi­ron­men­tal and reg­u­la­tory pol­icy paral­y­sis on the other. But with the Modi gov­ern­ment in the cen­tre, which has a his­tory of bring­ing re­forms in the min­ing in­dus­try, the in­dus­try ex­pects some ma­jor growth-ori­ented min­ing and min­eral devel­op­ment pol­icy re­forms in the next few years.

Con­clu­sion: Cur­rently, the stock trades at a P/E of 7.87x. In­vestors can ac­cu­mu­late the stock with a stop loss of Rs.37 for a price tar­get of Rs.65-70 in the next 12-15 months. The stock’s 52-week high/low is Rs.68/33.80 and its mar­ket cap stands at Rs.153 crore.

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