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29 Jan 2018

SHARE MARKET--A BROKER CHOICE//Omkar Speciality Chemicals

Omkar Speciality Chemicals: Buy for a target implying an upside of 15% in(72/50)

Valuation Conclusion

Company had embarked on the major capacity expansion to scale up for the existing product lines and launch of new molecules. Additionally, company will continue to tap new geographies, add new customers and increase wallet share with existing customers by offering a wide suite of products.

Company's business segments have contributed to Q3 FY 2017 growth coupled with stress on greater operating efficiencies, would enable company to clock higher profitability in the years ahead.

Company's operations are consistent on account of diversity in various niche products & wide customer base. Moreover, the EBIDTA margins are also reasonably strong and sustainable. Hence the management has decided to make every attempt to reduce the finance cost which can lead to enhanced profitability & EPS.

Company has obtained a patent related to the process for preparation of higher derivatives of Beta Ketoester granted by the Government of India. With this, the total number of patents till date granted to the company stood at 4, this is in line with achieving its goal of higher operating efficiencies, productivity, innovation and process excellence.

Estimating the share price of the company as per P/E valuation, putting the estimated P/E of FY18E at 6x the estimated EPS at Rs28.29, the estimated share price for next 1 year tenure turns around to be Rs180. Therefore, we recommend to BUY this script.

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