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REGISTER NOW OR LOGINCamlin Fine Sciences (NSE:CAMLINFINE) is one of the most integrated global manufacturers of specialty chemicals and their blends in the world. It is also one of the leading manufacturers of traditional antioxidants and Vanillin in the world. CFSL was formed after de-merging the fine chemical business of Kokoyu Camlin from Camlin Ltd. in 2006.
Camlin is better known as the ink and school material company in India. The company had humble beginnings starting from manufacturing ink powders and tablets in 1931, to expanding into stationery products, to diversifying into research, development, manufacturing, and marketing of specialty chemicals, ingredients, and additive blends.
It offers over 100 blend formulations and manufactures a variety of downstream products of Hydroquinone and Catechol. It supplies a range of products to Europe, the USA, Latin America, Asia, and the Far East.
Camlin Fine Sciences Pros
i) Extensive Capacity Expansion plans - CFS has grown both organically and inorganically over the years. It expanded its global footprint across many other countries across North America, Europe, Latin America, Asia, and the Far East, and completed its largest greenfield capacity expansion plant of a Diphenols facility in Dahej, India. The project started commercial production in September 2020 and is expected to add significant value to the company’s businesses. It has a capacity of 10,000 MTPA and will manufacture Hydroquinone and Catechol (collectively referred to as Diphenols) which are the major raw materials for all of the company’s downstream products. Camlin is also setting up a 6,000 MTPA Ethyl Vanillin plant in Dahej which will be fully functional from FY2023 onwards. The acquisition of the Italian facility back in 2012 was a major milestone in reducing the company’s raw material supply challenge to a great extent.
ii) Catering to Diverse Industry groups - Camlin caters to diverse industries like Foods, Animal Nutrition and Pet Food, Flavours & Fragrances, Pharmaceuticals, Agro Chemicals, Petrochemicals, Dyes and Pigments, Polymers and Bio Diesel, etc. CFS’ business solutions address large societal challenges such as food waste prevention across all levels of consumer, retail, and production. The company acquired AlagalR NutraPharms, an India-based manufacturer of nutritional lipids or omega-3 fatty acids, in this regard.
iii) Strategic Acquisitions and Partnerships - Given its extensive manufacturing experience and industry expertise, Camlin has built an esteemed clientele base. Some of Camlin’s key customers are Adani Wilmar, FMC Agricultural Products International, Vitablend Nederland B.V., etc. CFS has a strategic tie-up with Lockheed Martin for developing innovative technologies to unlock the full potential of the green energy of flow batteries to store renewable energy, wherein CFS would be supplying the key raw material. Camlin recently completed the acquisition of a controlling stake (80%) in AlgalR Nutrapharms Pvt Ltd., which is engaged in the business of manufacturing DHA, EPA acid, and downstream products.
iv) Large geographic footprint - Camlin’s manufacturing operations are spread across India, Mexico, Brazil, Europe, and China. It serves over 1,000 customers spread across more than 80 countries. It also has two R&D centers located in India and five dedicated application labs across the globe. The company derives ~13% of its revenues from India, while the balance is derived from export sales.
v) Diversified Product Portfolio - Camlin’s products can be broadly classified into Shelf life solutions, Performance chemicals, Aroma ingredients, and Health and wellness. It is an integrated manufacturer of specialty chemicals and traditional antioxidants. For the past 10-15 years, the company has been the world’s largest manufacturer of antioxidants namely TBHQ and BHA. These act as APIs for the human and animal food industry. The company’s TBHQ sale in India has grown by ~100% each year in the last five years. Camlin is a leading producer of Vanillin which is a key product used in various FMCG products and in the Pharmaceutical and Animal Feed industry.
vi) Improving Dynamics in India - Indian manufacturers stand a good chance to gain from the ‘Make in India’ initiative and shifting sentiment to reduce dependence on China. The Indian Chemical industry is expected to grow at a CAGR of 9.2% by FY’25, reaching up to $276 billion in the next five years. There is a rising demand for consumer products formulated using plant protein, healthier fats, and fewer synthetic ingredients. Factors such as the aging population; growing levels of obesity, comorbidities have urged consumers to fall back on healthier food habits.
Valuation
Camlin has a market capitalization value of more than Rs.2,800 crores. Shares of the company are currently trading near the Rs.220 mark and sport a PE of 55x. Camlin Fine share prices gained by more than 300% in the last year and 40%+ in the last three months. The company has decent ROE and ROCE values at 10% and 14% respectively. Camlin’s promoter holding is low at 21% with zero pledged percentage.
Camlin Fine Sciences delivered a 13% growth in consolidated revenues compared to the previous year, and more than doubled its profits to Rs. 65 crores in the last year. The company’s sales have improved to over Rs.500 crore from just Rs.40-45 crore ten years earlier. A strong focus on cost control also led to increased profitability. However, its debt has also increased 10x to ~Rs.550 crores in the last decade. The company has shown strong annual EPS growth with increasing FII shareholding.
The company recently pocketed funding from Infinity Holdings which would be directed towards consolidating and acquiring a 100% stake of its joint venture partners in Mexico and China subsidiaries, as well as to enhance the company’s portfolio in the health and wellness segment.
Future Opportunities
With a large geographical reach and diverse product portfolio, Camlin has significant potential to increase its product portfolio as well as expand into new geographies. It is planning to scale up its MEHQ capacity utilization to 70% and begin HQEE production, which are high-margin products.
The global antioxidants market is projected to reach $6.05 billion in 2028 and Camlin being one of the top companies is expected to gain from this large growth trend. The demand for Vanillin has been consistently growing and Camlin continues to increase its presence in this segment. It is targeting to become the second-largest producer of Vanillin globally, in the near future, after Solvay. There is a rising demand for the global nutraceuticals market with a focus on providing natural, clean, free-from, and sustainable health and nutrition solutions. Camlin’s Health and Wellness group is well-positioned to cater to the growing demand for consuming natural products.
The commercialization of the 10,000 MT Diphenol facility at Dahej, Gujarat, has doubled CFS’ diphenol capacity and is expected to manufacture Diphenol at a reduced cost compared to the cost of producing in Italy.
The food processing industry is growing in India and Camlin stands a good chance to gain from these growth trends. Shelf life products have a huge growth scope in India, given the country’s climate and poor logistics which leads to spoilage.
Risks
Bottom Line
Over the last decade, Camlin has continued to make rapid and strategic investments in diversifying its business from a commodity focus to a large manufacturer of specialty chemicals. The company manufactures products that have application in food, feed, and other essential commodities, and hence enjoys resilient demand. The Diphenols facility in Dahej is expected to drive higher volumes at lower costs, boost topline and improve margins. Camlin is expected to gain from the growing blends segment, increasing global demand for vanillin, expanding global footprint, strategic vertical integration, new launches, etc.
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