Saturday, January 3, 2015
Prima facie Amines and Plasticizers may termed as a company operating in a sector – Chemicals- which is boring and commoditised . But if we look into it deeply , we can realise it as a niche play in chemical sector itself and its R&D is working on a number of products to be used for futuristic applications.This company started with technical collaboration of Napthachemie of France (now a part of British Petroleum Plc).APL is a pioneer and one of the largest producers of ethanol amines, morpholine, alkyl morpholine and gas treating solvents in India. Company is a global supplier of organic chemicals which find wide applications in oil refineries, natural gas plants, ammonia plants, petrochemical plants, pharmaceutical and agrochemical industries.Company’s products are well accepted in overseas market and exporting about 50 % of its total production. Company is the market leader of Ethanol amines and Alkyl Alkanolamines in India with a market share of 75 %.APL is also the world’s largest producer of N-Methyl Morpholine Oxide ( NMMO). The technology for producing NMMO is indigenously developed by company’s own R&D wing.
Scope of Company’s Products
As I mentioned above, company’s major products are mainly used in Industries like Oil Refineries, Natural Gas Plants, Ammonia Plants, Petrochemical Plants..etc. The main product Methyl diethanolamine is used as a sour gas sweetening agent. In the original form Natural gas is “sour” which means the hydrogen sulfide( HS) is present in amounts greater than 5.7 milligrams per normal cubic meters .The HS must be removed from this raw gas before utilizing it . Process of removing such toxic gases from natural gas is called ‘Sweetening’. In addition to various types of chemicals ,APL producing industrial gases like Oxygen,Nitrogen,Acetylene and Medical Oxygen..etc
Another product company’s R&D is working on is to be used in “CO2 capture” . Since this is a new concept to many of us and many technical terms involved ,I am giving the Link HERE to understand more about this. As per the latest annual report of company , this product developed by its own R&D division is at ‘trial stage’ . Considering the strength and history of its R & D wing this may also turned as a success going forward. ( Its R&D wing wins many awards in the past from Government for developing many import substitute products) I believe the potential of this product is good especially at a time the entire world is taking lot of ‘Green Initiatives’ to protect the environment.
Products for Shale gas extraction is another field company is actively looking and R&D division is already in the process of developing products for this sector. This sector is presently at nascent stage and it may open up many opportunities in future. Company’s long standing relation with world’s largest oil companies as an existing supplier of various Oil/Gas exploration related products is expected to give an upper hand in this sector too.
In addition to this manufacturing business under the main company , APL having two subsidiaries – One operating in Project management and Execution Business (APL Engineering Service Private Limited) which is running a fabrication unit for pressure vessels at Khopoli . Merger process of this 100 % subsidiary with APL itself is under process .The other one APL Infotech Ltd is a 51 % subsidiary of APL which is specializing in developing and deploying technical software .Company claiming success in developing a first of its kind software for pipe leak detection in collaboration with IIT, Mumbai. Such a product may find more acceptability when piped LPG distribution extended to more cities .
Valuation and Conclusion
In the last five years , company reported top line growth from Rs.170 Cr to Rs.243 Cr . Growth accelerated in recent times and it moved from Rs.192 Cr to Rs. 243 Cr in 2013-14 over 2012-13. In last financial year ( 2013-14) company reported a bottom line of Rs.3.3 Cr and an EPS of Rs.6. Company’s debt is at bit highr level and current debt equity ratio is 1.84 ( Reduced from previous years 2.04) . In last year company paid an amount of Rs.9 Cr as interest alone . I believe , commercialisation of company’s new products and entry into new markets started to contribute in recent times and if this trend will continue APL can reduce its debt in coming years.Till now company spend lot of amount to develop products and setting up manufacturing facilities and the benefits of the same is expected to reflect going forward. Pressure from working capital side may also ease once the world economy back to growth .The last two quarters in this FY itself showing such a trend ( Refer below table)
Price of Crude oil declined in recent past and the increased production of shale gas is mentioned as a major reason for this. Be it crude, Natural Gas or shale gas ,APL will serve all these industries with its products.The other industries company serving – Pharma and Agrochemical- also having good growth potential.
Link to Company Website HERE
* Part of information taken from documents available in public domain
Disc: It is safe to assume that I have vested interest in APL.
Posted by VALUEPICK at 9:32 AM