Clariant Chemicals - A clear leader in specialty chemicals - Centrum

Clariant Chemicals (India) Ltd's (CCIL) parent has announced that SK Capital has agreed to purchase three out of the its total 9 business units - Textile Chemicals, Paper Specialties and Emulsions. This will include the transfer of the whole R&D, applications, sales and marketing organization along with production plant at Roha. We believe that the sale which is subject appropriate approvals if materializes would be very positive for the CCIL shareholders as the company is known to share the proceeds through special dividends. In the past, CCIL distributed a third of the sale proceeds from Thane land as special dividend to shareholders. We strongly recommend Buy on the stock at current levels.

Clariant Chemicals (India) Ltd. (CCIL), a 63.4% subsidiary of Clariant AG Switzerland, is a leading manufacturer of specialty chemicals in India catering to various sectors including automobiles, paints, personal care, food & beverage and textiles among others. It has four manufacturing plants across the country. We expect the company's business prospects to improve with potential for growth in user industries like textiles and specialty chemicals. We also expect significant export opportunity to the company from the parent group from the current year as some plants in EU and South Korea are not likely to be operative.

- CCIL, a debt-free company, enriched its cash position to Rs.217 crore as on June 2012 (12.8% of its current market cap) after it restructured its business last year by selling land & infrastructure worth Rs.240 crore. CCIL distributed a third of this as special dividend to shareholders. It declared a total dividend of Rs.60 per share for CY2011 (including a special dividend of Rs.30 post the sale of Thane land), giving a dividend yield of 9.4% at the current market price. We expect CCIL to maintain the normal dividend of Rs.30 per share for CY2012, offering a dividend yield of 4.8% which is quite rare for a MNC

- CCIL's parent has recently announced that SK Capital has agreed to purchase three out of the total 9 business units - Textile Chemicals, Paper Specialties and Emulsions. CCIL has production facilities for manufacture of textile chemicals and produces paper specialties and emulsion products at its Roha plant. The decision of CCIL to divest its business in India will be subject to appropriate approvals under the Companies Act, 1956 and these will be initiated after approval of Board of Directors.

- In 2011, CCIL launched a new consumer care laboratory at its Kolshet plant in Thane, near Mumbai and will focus on personal care and home care formulations. The facility will help the company to meet the demand from the growing domestic consumer care industry and in launching their global products faster in the Indian market.

- In the Q3CY2012, the net profit declined by 23% YoY to Rs.16.8 crore compared to Rs.21.6 crore in Q3CY2011. The net sales increased by 18% YoY to Rs.267.1 crore in Q3CY2012 compared to Rs.226.5 crore in corresponding quarter of last year. EPS for Q3CY2012 stood at Rs.6.28.

- At the CMP of Rs.637, the stock is trading at a valuation of 11.8x its CY2013E EPS of Rs.54. We recommend investors to continue accumulating the stock at current levels.

Source : Equity Bulls

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