Chemfab Alkalis

Yesterday, when the company declared its Q1FY14 performance, obviously the market was disappointed as the stock ended the day with a loss of over 6%. For the first quarter of the current fiscal, the company posted a 15% rise (YoY) in net sales at Rs.30 crore but sequentially, the topline declined 9%. Its total operating expense for the quarter was at Rs.23 crore of which over 56% was on account of power and fuel cost. Its tax expense, which in Q4 had shot up to over Rs.4 crore has come down this Q1. It ended the quarter with a net profit at Rs.6 crore, up 14% (YoY) but QoQ, it was down 2.5%.

The company has little or no debt. Its equity is tiny at Rs.4.59 crore, and its EPS for Q1FY14 was at Rs.5.69 (face value Rs.5). Reserve stands at Rs.101 crore. Promoters stake at end of Q1FY14 was at 75%. No new caustic soda plants are coming up and that is the main reason which drives the price, though it has been weak for some time now. Worldwide the membrane cell technology represents about 20% of production and nearly all new investment are in chloralkali production. Its business is shrouded in complete unpredictability and that explains the low discounting.