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Chemcrux Enterprises

Rural areas offer a more favorable environment compared to metropolitan cities. During my second wave of COVID vacation, I had the opportunity to spend time in my hometown and I discovered that it was a source of great inspiration and ideas. Although I have always been intrigued by stock market books, most of the ones I came across were from Western countries. This led me to search for books specifically focused on the Indian stock market, and that's when I came across an incredible book titled "How to Avoid Loss and Earn Consistently in the Stock Market" by Prasenjit Paul. I read the entire book during my journey from my hometown to Ankleshwar and upon finishing it, I was deeply moved by his story. While I generally have an independent mindset when it comes to my investments, I find myself giving a second thought to stocks recommended by individuals like Prasenjit Paul.

What type of company makes wealth for shareholders?

About

  • Chemcrux Enterprises is a Gujarat-based company dealing in the manufacturing of chemical intermediates for bulk drugs, dyes, and pigments. In 2018 they are finding good import substitutes and high-value products.


Management quality

  •  It was incorporated in 1996 by technocrat promoters Girish Shah and Sanjay Marathe from IISc. / IIT. Management is sound in technical knowledge & humble. Source AGM, valuepickr. 


Products

  1.  FUROSEMIDE: Sold under the brand name “Lasix”, the product is used for the treatment of fluid build-up due to heart failure, kidney diseases, high blood pressure, hypertension, etc.
  2. Mefenamic acid: Used for the treatment of mild to moderate pains from various conditions including blood loss from menstrual periods.
  3. Mebendazole: Used to treat parasitic worm infestations including pinworm, hookworm, etc. Its application is also currently being tested as an anti-cancer treatment.
  4. Chlorpromazine: Its primary usage is to treat psychotic disorders such as schizophrenia, bipolar disorder, etc.

The only producer of benzoic acid in this country.


CAPEX play

  • Management expects a 2.5x planned CAPEX, and there is clear growth visibility. Even conservatively, the earnings should become 3x over the next 5 years and sales go around 172 cr,.There is a little bit of progress on the EC for CAPEX and they get EC approval in June 2022. 


Fundamental of Company

  •  Promoter holding is 72.94
  • Debt to equity < 0.5. 
  • ROE & ROCE more than 30%.
  • The company is doing CAPEX from internal accrual. The cash position of the company is good. 

My rationale.

  • CAPEX and high-value addition of products are always in line with what management has said.
  • Opportunity is large in terms of CHINA plus one strategy.
  •  Currently received EC norm for CAPEX is triggered.
  • The balance sheet is strong. 

Risk

  • Small in size.
  • Ankleshwar has strict norms for the pollution control board.



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