Buy Himadri Speciality Chemical; target of Rs 184: KR Choksey

KR Choksey's research report on Himadri Speciality Chemical

Himadri Speciality Chemical Limited (HSCL), the largest manufacturer and only organized player of coal tar pitch in India, has created business value through developing a forward integrated business model. HSCL has emerged as a carbon conglomerate leveraging its competence in diversified businesses including coal tar pitch, chemical oils, carbon black, naphthalene and advanced carbon material with the use of single raw material -coal tar. HSCL enjoys a healthy market share of 70% in Coal Tar Pitch segment and 17% in Carbon Black segment. Further, the Company is the only manufacturer of Advanced Carbon Material (ACM) in India which is utilized as anode material in lithium-ion batteries and possesses tremendous growth potential. Going ahead, we believe that the Company will be able to capitalise business opportunities owing to accelerated demand from its end user segments (aluminium, graphite electrodes, rubber, tyres, lithium-ion batteries and so on) clocking a revenue growth of 16.22% over FY17-FY20E.

Outlook
We initiate coverage on Himadri Speciality Chemical Ltd with a “BUY” rating and value the Company at an EV/EBITDA of 14x on FY20E (implied P/E of 21.9x) and arrive at a target price of INR 184/share translating into an upside of 43.7% from CMP of INR 128/share.

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