Dynemic Products Analysis
Current Stock Price: INR 187.20
Dynemic Products is a manufacturer of food coloring.
Unit I: GIDC Estate, Ankleshwar, Gujrat
Unit 2: GIDC Estate, Ankleshwar, Gujrat
Unit 3: (Under Construction) Dahej, Gujrat
The promoter shareholding in the company has increased 0.30% since last year, and it now stands at 39.64%. There is no mutual fund holding in the company, which is a red flag. 37.75% of the holding is held by retail investors who hold more than 2 lacs worth of shares, 14.68% of the shareholding is held by the retail investors who hold less than 2 lacs worth of shares. The promoters hold the company through a holding company Dynemic Holding Company Ltd, and has been increasing stake.
Comment: It seems that there is not a lot of equity in retail shareholder’s hands. This can prove to be a red flag as that can result from a greater influence of stock operators in the company.
Profit & Loss Analysis:
YoY sales growth for the company has increased by 15% along with a healthy improvement in Operating Profit Margin.
The debt equity ratio has reduced steadily from 0.52 to 0.34.
The cumulative PAT over the past 10 years stands at 64.10 Cr, compared to the Cash Flow from operations which stand at 54.98 Cr. This implies that the company has been realizing its profits effectively.
Balance Sheet Analysis:
The debtor days had increased sharply in Mar-16, however the company has reined it in during the current financial year.
The Balance Sheet shows the company has been reducing its debt YoY, and has been increasing. Interest costs are negligible.
The company has displayed stellar improvements compared to its previous quarter.
The only other company in India in this space is Vidhi Specialty Chemicals. For a detailed peer analysis visit: http://www.moneycontrol.com/news/business/stocks/for-food-color-cos-the-next-trigger-will-be-adding-capacity-after-a-robust-earning-season-2450861.html
The market seems to be pricing in the capacity expansions that Vidhi is set to undertake. The expansions planned for Dynemic Products are yet to be priced in, because of some pending environmental approvals.
Conclusion: Considering the gap in PE between Dynemic Products and Vidhi Specialty Chemicals, it seems as though the market is waiting to get clarification from Dynemic Products on the Dahej Plant status.
Verdict: A good buying opportunity, with estimated 100% upside. Timeframe: 6 months.