DD Sharma has raked in a massive fortune from his stock picks. His
latest stock recommendations are in the same mould and look poised to
shower multibagger gains on investors.
DD Sharma recommended BEPL on 21st February 2017 when it was languishing at Rs. 24.
He explained that there are only two companies in India which manufacture ‘ABS Polymer’. One is a MNC called INEOS Styrolution and the other is BEPL.
He pointed out that ABS Polymer has wide application in a variety of industries and that the demand is growing at 10% CAGR.
He also noted that the aggressive demand for the product has prompted BEPL to increase its manufacturing capacity from 50,000 MT to 80,000 MT and is intending to increase upto 1,20,000 MT by FY19.
DD Sharma also reeled out impressive facts relating to the financial status of BEPL and emphasized that the stock is a must buy because the product is a niche one, there is increasing demand and limited competition.
We should have obediently listened to DD Sharma and bought truckloads of BEPL because the stock is now flying like a rocket.
The stock has given a mind-boggling gain of 176% since DD Sharma’s recommendation, just four months ago.
“In India, ABS is manufactured by Ineos Styrolution and Bhansali Engineering. Both of them together account for about 75% market share. The rest is met by imports, which also suggests the potential for these firms to expand revenue share. Due to the chemical complexity in producing ABS, it is capital intensive and hence, entry barrier for new firms is high.”
Management Meeting Update
We met with Mr Jayesh Bhansali – Executive Director of Bhansali Engineering Polymers Limited (BEPL). Following are the key takeaways of the meeting:
BEPL is a vertically integrated petrochemical company that manufactures ABS (Acrylonitrile Butadiene Styrene) which acts as a raw material for companies dealing in automobiles, home appliances, telecommunications, luggage, bus body and various other industries.
The company manufactures over 1200 colours and 200 different grades of engineering plastic. It supplies in lots as small as 500kgs and also up to 5 tons. Margins vary across different orders depending on the size of the order as well as delivery time lines.
BEPL has a plant in Satnoor and Abu Road each. Recently it completed expansion from 51,000 MTPA to 80,000 MTPA. In its next phase of expansion this will increase to 137,000 MTPA by mid FY18E.
We expect the company to grow revenues to ~Rs 10bn and profits to ~Rs 650m in FY18E versus Rs 6.3bn and Rs 348m in FY17. Thereafter we feel that it can achieve 20% CAGR on topline and bottom line given that both auto and electrical appliances industry is growing at a strong pace and there are only 2 players in the industry.
Currently the company is debt free. Going forward the management has maintained that it will not borrow for capex or for working capital requirements. They have also indicated that they do not plan to dilute equity.
Although the stock price has moved up recently, keeping in mind the growth prospects of the end user industry as well as management confidence in execution, it does appear to be an attractive bet for the long term. The company has also rewarded shareholders through dividends & their aversion to unnecessary borrowings provides additional comfort. At the CMP it is trading at PER of 14.1X FY18E & 11.8x FY19E rough cut EPS estimates of Rs 3.6 & Rs 4.3 respectively.
Bhansali Engineering (BEPL): 176% Gain in 4 months
DD Sharma recommended BEPL on 21st February 2017 when it was languishing at Rs. 24.
He explained that there are only two companies in India which manufacture ‘ABS Polymer’. One is a MNC called INEOS Styrolution and the other is BEPL.
He pointed out that ABS Polymer has wide application in a variety of industries and that the demand is growing at 10% CAGR.
He also noted that the aggressive demand for the product has prompted BEPL to increase its manufacturing capacity from 50,000 MT to 80,000 MT and is intending to increase upto 1,20,000 MT by FY19.
DD Sharma also reeled out impressive facts relating to the financial status of BEPL and emphasized that the stock is a must buy because the product is a niche one, there is increasing demand and limited competition.
We should have obediently listened to DD Sharma and bought truckloads of BEPL because the stock is now flying like a rocket.
The stock has given a mind-boggling gain of 176% since DD Sharma’s recommendation, just four months ago.
Are more gains due from BEPL?
Prima facie, it appears that BEPL has more steam in it.Research report by PL
PL has issued a ‘management meeting update’ report in which it has explained the future prospects of BEPL and assured that it is a good bet for the future.ABS polymer has high entry barriers: ETIG
ETIG has explained that the ABS business involves chemical complexity and is capital intensive and deters competitors from barging in and sharing the loot. This implies that BEPL will enjoy the duopoly status for a long time.“In India, ABS is manufactured by Ineos Styrolution and Bhansali Engineering. Both of them together account for about 75% market share. The rest is met by imports, which also suggests the potential for these firms to expand revenue share. Due to the chemical complexity in producing ABS, it is capital intensive and hence, entry barrier for new firms is high.”
Aggressive buying by promoter Jayesh B. Bhansali is sending a message?
Jayesh B. Bhansali and the other promoters of BEPL are frequent visitors to Dalal Street. On each visit, the promoters take home a massive chunk of the stock. The aggressive buying action is sending the clear message that the stock is still undervalued in relation to its potential.Bhansali Engineering Polymers (BEPL) Research Report By Prabhudas Lilladher
Management Meeting Update
We met with Mr Jayesh Bhansali – Executive Director of Bhansali Engineering Polymers Limited (BEPL). Following are the key takeaways of the meeting:
BEPL is a vertically integrated petrochemical company that manufactures ABS (Acrylonitrile Butadiene Styrene) which acts as a raw material for companies dealing in automobiles, home appliances, telecommunications, luggage, bus body and various other industries.
The company manufactures over 1200 colours and 200 different grades of engineering plastic. It supplies in lots as small as 500kgs and also up to 5 tons. Margins vary across different orders depending on the size of the order as well as delivery time lines.
BEPL has a plant in Satnoor and Abu Road each. Recently it completed expansion from 51,000 MTPA to 80,000 MTPA. In its next phase of expansion this will increase to 137,000 MTPA by mid FY18E.
We expect the company to grow revenues to ~Rs 10bn and profits to ~Rs 650m in FY18E versus Rs 6.3bn and Rs 348m in FY17. Thereafter we feel that it can achieve 20% CAGR on topline and bottom line given that both auto and electrical appliances industry is growing at a strong pace and there are only 2 players in the industry.
Currently the company is debt free. Going forward the management has maintained that it will not borrow for capex or for working capital requirements. They have also indicated that they do not plan to dilute equity.
Although the stock price has moved up recently, keeping in mind the growth prospects of the end user industry as well as management confidence in execution, it does appear to be an attractive bet for the long term. The company has also rewarded shareholders through dividends & their aversion to unnecessary borrowings provides additional comfort. At the CMP it is trading at PER of 14.1X FY18E & 11.8x FY19E rough cut EPS estimates of Rs 3.6 & Rs 4.3 respectively.
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