Fundamental Analysis: Clariant Chemicals Ltd

Clariant Chemicals is one of India's leading speciality chemicals companies. It has a large market share in pigments, textile chemicals and leather chemicals (and some agro intermediates whose business it is getting rid of)! It is an Indian subsidiary of Swiss firm Clariant. Clariant was formed formally in 1995 by a demerger of Sandoz Chemicals Division. It has its roots in Sandoz and Hoechst. The Indian division is one of the most significant ones in Clariant's global operations.

Current Market Price and P/E
Clariant Chemicals Ltd currently trades at Rs. 400-420 levels. It has shown some increases in the past few weeks. The stock went up from around Rs 350 to Rs 400, without much resistance. At Rs. 409, the P/E ratio of Clariant Chemicals Ltd stands at 11.64. This is largely because of good performance in the previous quarters. In the last two quarters, it has posted some very good margins. As is visible from the graph below, Clariant has been having quite a rally in the stock markets since January 09.

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Financial Results
Clariant posted strong bottom line numbers in Q1 and Q2 of this year. However, the top line growth was not impressive. In Q1, YoY, the sales were down 5% and in Q2, they were down around 3%. However, margins grew as PBDT in both quarters were higher by 27% and 23% respectively. EPS has risen steadily, in sync with increased bottom line figures. The company has practically no debt on its books, and this is a significant plus.

Historic Price
Year Open Price High Price Low Price Close Price No. of
Shares
No. of
Trades
Total Turnover(Rs.) * Spread (Rs.)
H - L C - O
2003 240.50 293.35 185.55 261.50 1424464 31058 325,440,451.00 107.80 21.00
2004 261.30 322.35 221.00 279.95 844383 17171 221,661,331.00 101.35 18.65
2005 280.00 346.00 237.50 331.40 1422995 14439 412,893,546.00 108.50 51.40
2006 333.75 395.00 226.60 337.15 4307452 17454 1,341,161,357.00 168.40 3.40
2007 340.00 364.00 255.00 328.95 2298639 41235 703,738,692.00 109.00 -11.05
2008 336.00 348.90 145.25 154.05 1666927 19480 383,065,218.00 203.65 -181.95
2009 156.65 422.95 144.30 409.60 3715252 52827 854,079,227.00 278.65 252.95

Sector Outlook
The Speciality Chemicals segment is an emerging sector in the growing Indian chemicals industry. This industry is dependent upon other industries such as paper, textiles, leather, detergents, plastics, etc. This segment did take a beating in the downturn, but the effect was lesser than the other sectors. The good thing about this industry, is that the industry is one which we cannot do without. Dyes, pigments and such chemicals are required - downturn or not. Margins may take a beating in a crisis, but then they recover very well later on because prices of raw materials go down as well.

Shareholding Pattern
Promoters hold 63.4% shares. Key public shareholders are mutual funds (UTI) holding around 3.18% and a brokerage house that holds 1.68% as on Sep '09. The stock has seen some good buying since the start of this year. Delivery ratios have been on the higher side.

Dividends
The stock pays good dividends. It paid Rs. 19 per share last year, and has already paid Rs. 10 this year as interim dividend.

Buy or Sell?
Fundamentally, this is one of the strongest companies listed on the Stock Exchanges. It has a wide product portfolio, and is having margins, for the moment at least. For a stock that's moving up so quickly, it would be advisable to wait and buy on dips. If you'll be buying, and it won't be for the short term, it would be rather be a really longer term- such as about two years. We recommend to buy in general at this point- if you don't need that money for some yearse, cautiously though, having the global events in the back of the mind, and fingers crossed at the Dubai's or for that matter, Abu Dhabi's next move.

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