Business Model:
IOL Chemicals makes APIs/ Bulk drugs which are used in pharma, ink, flexible packaging, adhesives, surface coatings, paints.
The company is largest producer of Ibuprofen in the world with around 35% market share which has a market size of $580Mn and growing at 3% per annum.
It is largest producer of ethyl acetate ($3.8Bn and growing at 9% per annum and second largest producer of Iso butyl benzene (30% market share)
It is adding new APIs to its business every year with latest additions being Clopidograle, Fenofibrate, Pentoprazole and Metformin and supplies to 80 countries.
b. Competitive advantage:
Good mix of API and chemicals with 59% from APIs and 41% from chemicals. Has a single plant and hence strong economies of scale. Huge customer base and highly diversified. Producing around 10 different major APIs and 5 major chemicals. It exports to 80 countries world wide. It is net zero debt. (Debt equity ratio reduced from 2 to 0 in FY18 to FY21)
c. Financials:
Sales growth:
Annual Sales have increased from 644Cr in 2016 to 1900 Cr in 2021. This is a 3 fold increase in sales; Sales growth has been consistent and the last 1 year sales growth is 15%
EBITDA/ PAT Growth:
PAT increased from 4.7Cr in FY17 to 361Cr in FY20. This is driven by significant revenue increase and interest savings along with higher margins. EBITDA increased from 103Cr to 600Cr in the same period.
Margin:
The gross profit margin increased from 32% to 44% in FY18-FY21. EBITDA margin increased from 15% to 31% in the same period. PAT from 1% to 19%
ROE: Increased from 3 to 57 from FY17 to FY20. FY19 ROE is 70
ROCE: Increased from 12 to 68 from FY17 to FY20. FY19 ROCE is 56
Debt and coverage:
Debt reduced from 421Cr in FY18 to 56Cr in FY20. Also cash and balances are much higher than debt and current liabilities. All the current assets increasing consistently due to positive cash flows. Interest coverage ratio is 27 and current ratio is 2
d. Shareholding:
Promoters hold 43% stake and institutions hold 8% stake.
e. Expensiveness: PE ratios:
Earning per share: Rs. 78, Share price : 622; PE ratio = 8; Price to book ratio = 3.4;
Industry average PE ratio is 31;
Dividend Yield : 0.49%
EV/ EBITDA is 1.53
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