The document provides a research report on Chembond Chemicals Ltd by CMP Securities. Some key points: - Chembond reported a 34.88% increase in net profit to Rs. 48.76 million for Q4 FY15 compared to the same period last year. - Revenue was up 0.47% to Rs. 741.44 million for Q4 FY15. Earnings per share increased 34.88% to Rs. 7.32. - The report recommends buying Chembond shares with a target price of Rs. 460, citing expected sales and profit growth over the next few years. Net sales and profit are estimated to grow at a CAGR of 9%

1. CMP 402.20
Target Price 460.00
ISIN: INE995D01017
MAY 23rd
2015
CHEMBOND CHEMICALS LTD
Result Update (CONSOLIDATED BASIS): Q4 FY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Specialty Chemicals
BSE Code 530871
Face Value 10.00
52wk. High / Low (Rs.) 430.00/150.00
Volume (2wk. Avg.) 3380
Market Cap (Rs. in mn.) 2678.65
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 3016.09 3257.38 3550.54
EBITDA 282.50 319.22 358.60
Net Profit 123.79 153.44 177.89
EPS 18.59 23.04 26.71
P/E 21.64 17.46 15.06
Shareholding Pattern (%)
1 Year Comparative Graph
CHEMBOND CHEMICALS LTD S&P BSE SENSEX
SYNOPSIS
Chembond Chemicals Ltd is the leading
manufacturer and supplier of Specialty Chemicals to
diverse sectors in India.
During Q4 FY15, consolidated net profit jumps to
Rs. 48.76 mn against Rs. 36.15 mn in Q4 FY14, an
increase of 34.88%.
The company achieved a consolidated turnover of
Rs. 741.44 mn for the 4th quarter of the current year
2014-15 as against Rs. 737.99 mn in the
corresponding quarter of the previous year.
During Q4 FY15, consolidated EBIDTA is Rs. 84.19
mn as against Rs. 71.59 mn in the corresponding
period of the previous year, grew by 17.60%.
During Q4 FY15, consolidated PBT was up by
21.93% to Rs. 61.32 mn from Rs. 50.29 mn in Q4
FY14.
EPS of the company stood at Rs. 7.32 a share
during the quarter as against Rs. 5.43 over previous
year period.
Chembond Chemicals has signed an agreement with
Henkel to divest its 49% shareholding in Henkel
Chembond Surface Technologies Ltd.
The company has recommended Dividend of Rs. 3
per equity share of Rs. 10 each.
Chembond Chemicals Ltd and Calvatis GmbH,
Ladenburg, Germany have signed a JV agreement
for manufacturing and distributing disinfectants
and cleaning solutions for the food, beverage, dairy
and brewing industry in the Indian sub-continent.
Net Sales and PAT of the company are expected to
grow at a CAGR of 9% and 28% over 2014 to 2017E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Chembond Chemicals Ltd 402.20 2678.65 18.59 21.64 2.81 30.00
Omkar Speciality Chemicals Ltd 158.10 3253.40 11.80 1.40 2.05 15.00
Fineotex Chemical Ltd 150.10 3371.20 4.03 37.25 5.61 5.00
Camlin Fine Sciences Ltd 91.40 8764.20 2.69 33.98 8.56 45.00

2. QUARTERLY HIGHLIGHTS (CONSOLIDATED)
Results updates- Q4 FY15,
Months Mar-15 Mar-14 % Change
Net Sales 741.44 737.99 0.47
Net Profit 48.76 36.15 34.88
EPS 7.32 5.43 34.88
EBITDA 84.19 71.59 17.60
The consolidated net profit jumps to Rs. 48.76 million against Rs. 36.15 million in the corresponding quarter
ending of previous year, an increase of 34.88%. The company achieved a turnover of Rs. 741.44 million
registering an increase of 0.47% for the 4th quarter of the current year 2014-15 as against Rs. 737.99 millions in
the corresponding quarter of the previous year. Reported earnings per share of the company stood at Rs. 7.32 a
share during the quarter as against Rs. 5.43 over previous year period. Profit before interest, depreciation and
tax is Rs. 84.19 million as against Rs. 71.59 million in the corresponding period of the previous year.
Break up of Expenditure
Particulars (Rs. mn) Q4 FY15 Q4 FY14
%
Change
Cost of material
Consumed
405.47 427.34 -5%
Employee Benefit
Expenses
81.90 75.78 8%
Depreciation &
Amortization Expense
13.69 8.08 69%
Other Expenses 158.40 148.72 7%

3. Latest Updates
• Chembond Chemicals Ltd has signed an agreement with Henkel to divest its 49% shareholding in Henkel
Chembond Surface Technologies Ltd.
• Chembond Chemicals Ltd has recommended Dividend of Rs. 3 per equity share of Rs. 10 each.
• Chembond Chemicals Ltd, Mumbai, India and Calvatis GmbH, Ladenburg, Germany have signed a joint
venture agreement for manufacturing and distributing disinfectants and cleaning solutions for the food,
beverage, dairy and brewing industry in the Indian sub-continent.
COMPANY PROFILE
Chembond Chemicals Ltd is the leading manufacturer and supplier of Specialty Chemicals to diverse sectors of
industry such as automobile, steel mills, fertilizers, refineries and petrochemicals, power plants and
infrastructure projects such as metro systems, bridges and expressways.
Chembond has identified Water as the major area of thrust and has taken steps with the formation of JV - H2O
Innovation India Ltd to offer 'State of Art Technology' that provides complete solution to water problems - from
RW treatment to waste water recycling.
Chembond has prided itself on being the "First Choice" for many 'quality conscious' customers throughout India.
With technical service being an important component of its proposition, all their products are backed up by
technical service provided by a well trained and experienced team of technical personnel.
The Company has four subsidiaries namely Chembond Ashland Water Technologies Limited, Protochem
Industries Private Limited, Chembond Inver Coatings Limited and Chembond Clean Water Technologies Limiteed
(formerly H2O Innovation India Limited).

4. FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
FY14A FY15A FY16E FY17E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 66.60 66.60 66.60 66.60
Reserves and Surplus 796.14 885.86 1018.74 1161.36
Minority Interest 126.05 125.44 130.46 136.98
A) Net worth 988.79 1077.90 1215.80 1364.94
B) ESOP Application money pending
allotment
0.00 2.41 0.00 0.00
Non-Current Liabilities:
Long-term borrowings 96.93 19.97 16.77 14.76
Deferred Tax Liabilities [Net] 32.65 26.24 27.55 28.65
Long Term Provisions 9.86 19.06 22.11 24.54
C) Sub Total - Non-Current Liabilities 139.44 65.27 66.44 67.96
Current Liabilities:
Short-term borrowings 210.46 196.72 184.92 170.12
Trade Payables 531.98 485.96 505.40 530.67
Other Current Liabilities 132.83 159.19 181.48 199.62
Short Term Provisions 48.24 41.16 43.22 44.95
D) Sub Total - Current Liabilities 923.51 883.03 915.01 945.36
Total Liabilities (A+B+C+D) 2051.74 2028.61 2197.24 2378.26
ASSETS:
Non-Current Assets:
Fixed Assets
Tangible Assets 461.09 441.79 477.13 515.30
Intangible Assets 75.05 72.91 80.20 86.62
Capital work-in-progress 31.16 33.90 36.27 38.09
a) Sub Total - Fixed Assets 567.30 548.60 593.61 640.01
b) Non Current Investments 5.65 7.72 8.41 8.92
c) Long Term Loans and Advances 36.27 60.45 70.12 78.54
E) Sub Total - Non-Current Assets 609.22 616.77 672.14 727.46
Current Assets:
Current Investments 0.06 0.06 0.20 0.22
Inventories 347.67 305.00 326.35 349.00
Trade Receivables 868.06 860.48 912.11 975.96
Cash and Bank Balances 126.30 160.79 191.52 222.16
Short-terms loans & advances 100.43 85.51 94.92 103.46
F) Sub Total - Current Assets 1442.52 1411.84 1525.09 1650.80
Total Assets (E+F) 2051.74 2028.61 2197.24 2378.26

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs. mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 2756.67 3016.09 3257.38 3550.54
Other Income 0.00 0.00 0.00 0.00
Total Income 2756.67 3016.09 3257.38 3550.54
Expenditure -2536.72 -2733.59 -2938.15 -3191.94
Operating Profit 219.95 282.50 319.22 358.60
Interest -40.29 -36.11 -33.22 -31.23
Gross profit 179.66 246.39 286.00 327.38
Depreciation -28.14 -43.23 -51.01 -58.15
Profit Before Tax 151.52 203.16 234.99 269.22
Tax -59.84 -56.76 -65.33 -76.73
Profit After Tax 91.68 146.40 169.66 192.49
Minority Interest -14.71 -20.54 -16.23 -14.60
Share of Profit & Loss of Asso 0.62 -2.07 0.00 0.00
Net Profit 77.59 123.79 153.44 177.89
Equity capital 66.60 66.60 66.60 66.60
Reserves 790.74 885.86 1018.74 1161.36
Face value 10.00 10.00 10.00 10.00
EPS 11.65 18.59 23.04 26.71
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th June, 2015E
Value(Rs. mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 776.56 775.01 741.44 726.61
Other income 0.00 0.00 0.00 0.00
Total Income 776.56 775.01 741.44 726.61
Expenditure -704.72 -698.57 -657.25 -652.50
Operating profit 71.84 76.44 84.19 74.11
Interest -9.26 -8.67 -9.18 -8.45
Gross profit 62.58 67.77 75.01 65.67
Depreciation -9.65 -10.77 -13.69 -14.92
Profit Before Tax 52.93 57.00 61.32 50.75
Tax -18.34 -19.22 -8.43 -14.72
Profit After Tax 34.59 37.78 52.89 36.03
Minority Interest -7.12 -7.16 -2.06 -1.75
Share of Profit & Loss of Asso 0.00 0.00 -2.07 0.00
Net Profit 27.47 30.62 48.76 34.28
Equity capital 66.60 66.60 66.60 66.60
Face value 10.00 10.00 10.00 10.00
EPS 4.12 4.60 7.32 5.15

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 11.65 18.59 23.04 26.71
EBITDA Margin (%) 7.98% 9.37% 9.80% 10.10%
PBT Margin (%) 5.50% 6.74% 7.21% 7.58%
PAT Margin (%) 3.33% 4.85% 5.21% 5.42%
P/E Ratio (x) 34.52 21.64 17.46 15.06
ROE (%) 10.69% 15.37% 15.63% 15.68%
ROCE (%) 21.30% 27.86% 28.77% 29.50%
Debt Equity Ratio 0.36 0.23 0.19 0.15
EV/EBITDA (x) 13.00 9.68 8.42 7.37
Book Value (Rs.) 128.73 143.01 162.96 184.38
P/BV 3.12 2.81 2.47 2.18
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs. 402.20, the stock P/E ratio is at 17.46 x FY16E and 15.06 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.23.04 and
Rs.26.71 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 28% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 8.42 x for FY16E and 7.37 x for FY17E.
Price to Book Value of the stock is expected to be at 2.47 x and 2.18 x for FY16E and FY17E respectively.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth
story in the coming quarters also. Hence, we recommend ‘BUY’ in this particular scrip with a target price of
Rs.460.00 for Medium to Long term investment.

8. INDUSTRY OVERVIEW
The Indian chemical industry stands as the third largest producer in Asia and 12th in world, in terms of volume.
This industry could grow at 14 per cent per annum to reach a size of US$ 350 billion by 2021. India accounts for
approximately 7 per cent of the world production of dyestuff and dye intermediates and is currently the world's
third largest consumer of polymers and fourth largest producer of agrochemicals.
The market size of the chemical industry is expected to grow to US$ 350 billion by 2021. With 72 per cent of the
total production share, alkali chemicals form the largest segment in the Indian chemical industry. Total exports of
chemicals grew at a compound annual growth rate (CAGR) of 16.2 per cent to reach US$ 15.5 billion in FY13.
The Government of India has announced a number of measures to improve competitiveness in this sector, which
includes abolishing of industrial licensing for most sub-sectors and granting 100 per cent approval to FDI.
The chemical industry has scope for growth in the specialty chemicals market which has expanded at a CAGR of
about 12 per cent over FY07-11. The figure is expected to rise to 13 per cent over the next five years to reach US$
45 billion by FY17. By 2017, the construction chemicals sector is also set to touch US$ 1,040 million. The polymer
chemicals sector is anticipated to grow at a higher rate due to growth in plastic demand resulting from increased
usage in packaging, construction and automotive sectors.
Disclaimer:
This document is prepared by our research analysts and it does not constitute an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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