20 Microns Ltd
(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.