Buy Camlin Fine Sciences; target of Rs 115: Emkay Global Financial

Emkay Global Financial's report on Camlin Fine Sciences

CFIN has commissioned the Diphenol manufacturing plant at Dahej, Gujarat, at a total cost of Rs1.8bn (as per estimates). CFIN has started production of Hydroquinone (HQ) and Catechol (CT), key raw materials for the business, at this facility. CFIN will produce HQ and CT at the lowest cost in the world at the Dahej facility, which shall benefit margins to the tune of $1-1.5/kg (300-400bps). It also plans to gradually add downstream products such as MEHQ and Ethyl Vanillin. Such incremental capacity plans would enhance its addressable market share and expand its footprint globally. The commissioning of the Dahej plant would also lead to a structural reduction in inventory days, given that the bulk of HQ will be sourced from the India plant. CFIN currently imports HQ from Italy, which takes ~49 days to reach India. Dahej remains the key catalyst for margin expansion, while improvement at subsidiaries will maximize the benefits. We expect revenue/EBITDA/PBT to grow at 18%/27%/45% CAGR over FY20-23E.

Outlook

We retain Buy with a TP of Rs115 (15x Sept’22E) and OW in EAP.

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