Ajcon Global has come out with its report on Fine Organics Industries Ltd. The research firm has recommended to "Subscribe " the IPO in its research report as on June 19, 2018.
Incorporated on May 24, 2002, Fine Organic Industries Limited (“Fine Organic”) is the largest manufacturer of oleochemical - based additives in India and a strong player globally in this industry. The company produces a wide range of specialty plant derived oleochemicals - based additives used in the Food, Plastic, Cosmetics, Paint, Ink, Coatings and other Specialty Application in various industries. The Company’s brand ‘Fine Organics’ brand has a legacy of over 44 years and the brand is widely recognized in the major markets in which the company compete. As at March 31,2018, Fine Organic had a range of 387 products sold under the ‘Fine Organics’ brand, used in the (a) Plastic Industry and (b) Food Industry and others (Cosmetics, Printing Inks, Coated Papers, Lube Additives, Wires and Cables, Coatings and Other Specialty Applications) industries. Fine Organic is the first company to introduce slip additives in India and they are the largest producer of slip additives in the world.
Valuation and Outlook
At the upper end of the price band, the issue is valued at 28 times of 9MFY18 annualized EPS which we feel is reasonable considering it is the only Company with significant market sharein India. With due consideration to factors like a) largest producer of Oleochemical – based Additives in India, b) first mover advantage in India, c) one of the few players in the Oleochemical – based Additives industry in the world,d) specialized business model with high entry barriers (products require specialized research and chemistry along with specialized expensive equipments based on imported technology, specialty and formulated products difficult to replicate), e) diversified product portfolio, f) negligible threat of substitutes, g) flexible and strategically located production facilities with in – house development capabilities, h) strong R&D capability with a focus on innovation, i) diversified customer base with long term relationships with marquee customers, j)strong balance sheet with Net Debt: Equity at 0.1x, favourable Net Working Capital cycle of ~70 days, positive operating cashflow with decent RoE of 25%, we recommend “SUBSCRIBE”to the issue.
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