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Last Updated : May 29, 2018 06:16 PM IST | Source: Moneycontrol.com

Buy Ion Exchange, target of Rs 550; also add to portfolio for long term wealth creation: Akash Jain

The company has decent return ratios: ROE: 19.6 percent and ROCE of 24.3 percent on consolidated basis.

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Akash Jain

Ion Exchange: Buy | Target - Rs 550 by FY19-end

The company is in its 53rd year of operations and was formed in 1964 as a subsidiary of a UK company called Permutit and it has become a wholly-owned Indian company in the year 1985. Currently the company represents India as a global MNC and operates out of almost all major countries in the world, either directly or through representatives in these countries.

Ion Exchange India Limited is a pioneer in the field of Water Management and Waste Management in India. The company is headquartered in Mumbai and has six manufacturing facilities and assembly facilities across India and has also presence abroad. The company has expanded its footprints globally and possesses a diversified product range. It offers one stop water and non-water treatment solutions catering to diverse segments like infrastructure, industry, institutions, municipal, homes and communities, urban and rural.

Akash Jain
Akash Jain
Vice President Equity (Research)|Ajcon Global Services Ltd

It is engaged in providing solutions across the water cycle from pre-treatment to process water treatment, waste water treatment, recycle, zero liquid discharge, sewage treatment, packaged drinking water, sea water desalination etc. In addition, engaged in manufacturing ion exchange resins, speciality chemicals for water and waste water treatment as well as non-water applications. The company has over 50 patents to their credit and 100+ products commercialized. The company exports to Africa, Japan, Middle East, Russia, South East Asia, Europe, UK, USA, Canada and neighbouring countries.

The company operates in three segments which are:

a) Engineering (60%): Provides comprehensive and integrated services and solutions in water & waste water treatment including Sea Water desalination, Recycle and Zero liquid discharge plants to diverse industries.

b) Chemicals (30%): Provides a comprehensive range of resins, speciality chemicals and customized chemical treatment programmes for water, non-water and specialty applications.

c) Consumer Products (10%): Caters to individuals, hotels, spas, educational institutions, hospitals, laboratories, railway and defence establishments providing safe drinking water and a clean environment.

The Company has marquee clients:

a) Industrial – NTPC, NPC, Reliance, IOCL, JSW, CPCL, L&T, Essar group, IRCTC, BHEL, Tata Group.

b) Institutional – Leela, Military Engineering Services, Taj Hotels, Holiday Inn, Hyatt Regency, Oberoi Hotels, Apollo Hospitals, Escorts Heart Institute, DLF, Puravankar.

c) International – Cargill, Technip France, Unilever group, Jurong, Thyssenkrupp (Uhde), Jacobs, Kawasaki, Mitsubishi, PDO Oman, Emirates Steel, IKPP Indonesia.

In Q4FY18, recovery was witnessed in the engineering segment witnessed post November 2017 continued in this quarter resulting in increase in sales and profitability. The Management expects improving order visibility in the capital goods industry.

With regards to Sri Lanka Project worth Rs 1,300 crore, 17 percent of the total order has been completed. In FY19, incremental 35 percent of the project would be completed and balance in FY20.

In the Chemicals segment, there was improved off take due to seasonality in certain product segments resulting into higher sales growth over the previous quarters. However, margins have remained under pressure due to rising commodity price. The management is taking steps to reduce the impact of surge in crude oil prices. It is likely to pass on the increased costs to its customers. The Company has planned a capex of Rs 50 crore in FY19, out of which Rs 15 crore would be spent on Ankleshwar plant. The asset turnover is expected to be around 1-1.5 times from the capex.

However, there are some concerns with regards to its subsidiaries incurring loss and also facing some SEBI enquiry, which are pending with SAT.

The company has decent return ratios: ROE: 19.6 percent and ROCE of 24.3 percent on consolidated basis.

We recommend a Buy with a target of Rs 550 by FY19 end. In fact, we recommend the stock for including in standard portfolio for long term wealth creation.

Disclaimer: The author is Vice President - Equity Research, Ajcon Global. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on May 29, 2018 06:16 pm
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