Fundamental and technical analysis of Vinyl chemicals

1. Vinyl Chemicals Ltd
Fundamental &
Technical Analysis.

2. Objective of the study-
The objective of the study is completely from an
investor perspective. The study involves a
thorough knowhow of the fundamentals and
technicals of the company.
Introduction-
Vinyl Chemicals India Ltd is a company promoted
by Pidilite Industries India Ltd. Currently the
company is engaged in the business of trading in
chemicals especially in Vinyl Acetate Monomer
which it used to manufacture earlier in its plant
located in Raigad District. The current chairperson
and the managing director of the company is Mr M
B Parekh. Its registered office is in Mumbai’s
Nariman Point. Its corporate office is in Andheri.

3. Financials-
The company earns revenue from trading activities.
The company deals only in one product. The sales
of the company has grown 28% CAGR basis. The
highest growth rate expected in sales is 108% in
the year 2022. There has been a negative growth
in sales in the year 2020.
0
2E+09
4E+09
6E+09
8E+09
1E+10
1.2E+10
2017 2018 2019 2020 2021 2022 2023
AMOUNT
IN
CRORES
YEARS
Sales

4. The purchases have increased in direct proportion
to sales. The overall growth in purchases have
been 29% CAGR basis. The highest growth rate is
seen in 2022 that is 93%
The operating profit as a ratio of sales on a CAGR
basis has been 1.5%. The highest ever operating
profit ratio has been 2% and the ratio lies between
1-2% range. Being a trading company the ratio has
not been much lucrative.
0
2E+09
4E+09
6E+09
8E+09
1E+10
1.2E+10
2017 2018 2019 2020 2021 2022 2023
Amount
in
Crores
Axis Title
Purchases
0
20000000
40000000
60000000
80000000
100000000
120000000
2017 2018 2019 2020 2021 2022 2023
Amount
in
creores
Years
Operating Profit

5. The earnings above derived is after tax. The
earnings have increased 42.6% CAGR basis which
shows a healthy growth but the average earnings
are 3% of turnover.The growth in earnings is
healthier than operating profits. The company has
regular income from other investment streams
and is also receiving discounts from purchases.
This shows cost effectiveness.
0
50000000
100000000
150000000
200000000
250000000
300000000
350000000
400000000
2017 2018 2019 2020 2021 2022 2023
Amount
in
crores
Years
Earnings

6. The company decides dividend based on the
financial performance.There is as such no
predecided dividend payout ratio relative to
earnings. The company is regularly paying
dividends which is a good sign of financial stability
for investors.The dividend payouts in the year
2019, 2020,2021 were constant. The hike in the
dividend payouts was seen in the year 2023 where
the dividend decided to be paid was Rs.10 per
share. Whenever there has been a hike in the
financial performance of the company the
company has given good returns to its equity
holders.
0
2
4
6
8
10
12
2017 2018 2019 2020 2021 2022 2023
AMOUNT
IN
CRORES
YEARS
DIVIDEND PER SHARE

7. The company has been growing moderately at
13.5% CAGR basis. The hike in the growth rate was
seen in the year 2022 after which the growth rate
has moderated itself.The growth in dividend
payouts has not been in line with the growth of
the company. The average growth in dividend
payouts has been 46% CAGR basis.
Ratio Analysis-
 The net profit ratio denotes the extent to which
earnings are related to sales. The netprofit ratio
shows a direct relationship with sales. On an
average the net profit ratio has been 3% of sales
higher than the operating profit ratio reason
being the company received proceeds from sale
of investments as a result liquidity was well
managed and the outflow on purchases was
0
5
10
15
20
25
30
35
2017 2018 2019 2020 2021 2022 2023
percentages
years
GROWTH RATE

8. also less due to huge discount received from
suppliers.
 The Asset Turnover Ratio denotes the extent to
which assets of the company were effectively
employed to generate sales. The asset turnover
ratio of the company on CAGR basis has been
2078 times which denotes the company’s
efficiency in utilising the assets in its operations.
The asset turnover has been highest in the year
2022 of 4112 times.
 The inventory turnover ratio indicates the
extent to which inventory gets converted in to
sales. Higher the ratio indicates good sales and
healthy growth. The company’s inventory
turnover ratio has been on CAGR basis 10 times
which indicates moderate performance. The
company needs to consistently improve its ratio
by focusing on improving the sales. The highest
inventory turnover ratio has been in 2022 of 13
times
 The receivable turnover ratio indicates the
extent to which company is efficient in
managing receivables. The receivable turnover
ratio on an average is 12 times. The average
collection period in this case is 30 days
indicating the receivables are getting encashed
within 30 days. Quicker encashment of
receivables will result in better working capital

9. management and will enable in having a
stronger financial stability coupled with
enhanced investor confidence.
 The payable turnover indicates the extent to
which company is efficient in managing its
payables. Lower the ratio indicates the entity is
taking time to payback its suppliers. On an
average the payable ratio has been 6 times
which denote an average collection period of 61
days. This indicates that company effectively
utilises its receivables for paying its payables.
 Debt equity ratio indicates the manner in which
the entity is financed. It also enables in
identifying the financial stability of the company.
The desired ratio is 2:1. Higher the ratio denotes
riskiness of the company and would result in
substantial portion of earnings utilised for
paying off the obligation. In the current scenario
the debt equity ratio has been 0 which means
the company is all equity financed and there is
no debt. This has gained confidence in investors.
Apart from this the investors are assured of
return on investment in the form of dividends.
 Current ratio indicates how well the company is
managing its working capital requirements. The
desired ratio is 1:1. The ratio on an average of
the company has been 1.87 indicating that for
every Rs 1 of liability there are Rs.1.87 of assets.

10. The ratio shows that company is solvent enough
to payoff its liabilities.
 Return on equity denotes true returns to
investors emanating from the operations of the
company. Higher the returns more will be the
investor confidence. The ROE on an average has
been 22% however the data shows that there
has been decline in the returns to equity
shareholders during the period 2019,2020 and
2021. It can also be inferred that returns on
equity has been in direct proportion to revenue.
The highest return on equity has been in the
year 2022 I.e 36% which was distributed among
the investors of the company in the form of
dividends.
 Return on capital employed denotes the return
emanating from the operations of the business
on the amount capital employed by the
company. The ROCE on an average has been 10%
far much lower than the ROE reason being the
company’s operating profits were not showing a
favourable growth when compared to earnings.
The company has been able to pay dividends to
its investors from the sale proceeds of
investments which is clearly visible from the
financials and not from its operating profits.
 Book value per share denotes the true value of
the company. It is also known as the intrinsic

11. value of the company. The BVPS is compared
with the market price per share to evaluate
investment opportunities. On an average the
BVPS has been Rs.39 per share. When
compared the BVPS with the market share we
can infer that no investment opportunity exists
because the stock is overvalued in the market
and therefore the investment is not found to be
cost effective however one can take in to
account the fundamentals while making an
investment decision.
 The PE ratio again gives an indication that
whether the stock is overpriced or underpriced.
Based on the data it could be inferred that the
stock has been overpriced in the market.
Technical analysis-
 The share price has grown on an average at
45.68%. The hike in the share price has been the
highest during the period 2022 and 2023 and
has been continuing till date.
 The share price has been constantly increasing
from 2020 to 2021 the reason being healthy
financials.
 The beta of the company on an average has
been 1.4 times to beta of nifty. This means for
every 1 time movement in nifty index the stock

12. will respond 1.4 times which indicates that the
stock is highly volatile.
 The stock has started the year with
consolidation and has continued the trend for
almost a quarter after which the stock has
bounced up resembling a three white soldiers
pattern.
 The stock has reached the peak price of 953 rs
per share on 19/09/2022 and this is the highest
ever price the stock has secured. After this the
stock has shown a downward trend whereby
the decrease has been in increasing order.
 On 05/04/2023 we can resemble a three white
soldiers pattern which has culminated in
bouncing up the stock from Rs.346 per share to
Rs 548 per share.
 After which the stock has shown an inverted
head and shoulder pattern from 03/05/2023 to
13/06/2023 and unfortunately post that the
stock has not sustained the neckline and has
fallen down whereby the decrease has been in
increasing order.

13. Quarterly Analysis-
There has been a negative growth in sales,PBT and
PAT when figures were compared with
corresponding quarters of last year.
Sales has shown a negative growth of 63% and 52%
in qtr1 and qtr2 respectively.
PBT has shown a negative growth of 68% and 60%
in qtr1 and qtr2 respectively.
PAT has shown a negative growth of 68% and 61%
in qtr1 and qtr2 respectively.