Dharmic Bull

New Portfolio Entry: Agarwal Industrial Corporation Limited

Buy Price: 970

Agarwal Industrial Corporation Ltd approves allotment of 5 lakh shares |  EquityBulls

Reasons for buying:

  1. 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.
  2. 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.
  3. Company has scaled up massively with both 10 Year Sales & PAT growth > 30% p.a.
  4. 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.
  5. Last 5 years, cash flows are above average in terms of quality. Company has manageable levels of debt.
  6. 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.
  7. 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.
  8. With increased volumes, their storage and transport costs per unit will come down leading to higher profitability.
  9. Promoter has experience of over 4 decades.
  10. Ace investor – Ashish Kacholia’s stake in the firm is 4%.


  1. 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.
  2. 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.

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