Initiating Coverage: Bodal Chemicals - BUY - TP Rs.210

Bodal Chemicals (BCL) is a fully integrated manufacturer of dye intermediates /dyestuff and has diversified into specialty chemicals. Stricter environmental norms and increased costs have substantially eroded the low cost advantage of Chinese dye manufacturers. BCL, with presence across dyestuff value chain and strong domestic/exports penetration, is aptly placed to take benefit of the opportunities in dyestuff industry. It commands a market share of ~3% of the global and ~10% of the domestic dyestuff industry. In terms of dye intermediates, its market share is at ~5% at the global level and ~20% domestically. Its position in the industry and lucrative (high margin) expansion plans, make us believe that, the company could report ~19% CAGR growth both in revenue and PAT, with an EBITDA margin in the range of 17-18% during the FY17-FY19E period. Given its integrated business model and diversification into specialty chemicals, we believe the stock is available at attractive valuation of 11.1x/9.7x FY18E/FY19E earnings. For superior RoE of 27-30%, we feel the company should warrant higher multiples. We are valuing company at 13x FY19E earnings and have arrived at a target price of Rs210, implying upside of 33%. We initiate coverage with BUY rating

Shares of BODAL CHEMICALS LTD. was last trading in BSE at Rs.166.45 as compared to the previous close of Rs. 165.3. The total number of shares traded during the day was 158035 in over 1706 trades.

The stock hit an intraday high of Rs. 170.1 and intraday low of 165.3. The net turnover during the day was Rs. 26549437.

Source : Equity Bulls

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