Company is a manufacturer, trader and logistics provider of bitumen and value-added bitumen products. This forms 80% of their revenues. They are the largest private sector player catering to 20-30% of demand.
They operate their own 9 shipping vessels to directly import raw materials from Middle East thus ensuring uninterrupted supply and better margins than competitors. They also have 350+ fleet for transporting bitumen and 300+ for transporting LPG.
Company has scaled up massively with both 10 Year Sales & PAT growth > 30% p.a.
Company has almost doubled its fixed assets over the last 3 years, and this is not fully captured in sales growth. With operating leverage playing out, superior profitability can be expected going forward.
Last 5 years, cash flows are above average in terms of quality. Company has manageable levels of debt.
Infrastructure development (especially roads) requires bitumen. Currently, most Indian roads are built on concrete – which is more risky, expensive, high maintenance vis a vis bitumen roads.
Despite India having the second or third highest road network in the world, it’s bitumen consumption is almost 3 times less than US and China – implying under penetration and massive potential going forward.
With increased volumes, their storage and transport costs per unit will come down leading to higher profitability.
Promoter has experience of over 4 decades.
Ace investor – Ashish Kacholia’s stake in the firm is 4%.
Risks:
Bitumen being a petroleum derived product has volatile prices. This affects company’s operating margins. Similarly, high shipping fuel price increases the company’s costs.
Government emphasis on infrastructure development and upkeep is a strong tailwind. However, if the government’s priority changes or a change in the government itself, demand for company’s products will get affected.
Leave a Reply