Chemplast Sanmar IPO Details | Value Research Chemplast Sanmar IPO Review: Let’s see how one of India’s largest manufacturers of PVC resin has performed post-listing. Read to know about our analysis of Chemplast Sanmar stock performance since listing and more.
IPO Analysis

IPO update: Chemplast Sanmar

Let's see how one of India's largest manufacturers of PVC resin has performed post listing

Chemplast Sanmar came out with its IPO in August 2021. You can read our detailed analysis of the IPO here. In this update, we will be focusing on the stock performance and business performance of the company since listing.

Our analysis of the IPO
Chemplast Sanmar is engaged in the business of manufacturing specialty paste PVC resin and custom chemicals for pharmaceutical and agrochemical companies. They are also the third-largest manufacturer of hydrogen peroxide in the South India region. Apart from these products, Chemplast Sanmar also manufactures Chloromethanes and Refrigerant Gas. The company has three manufacturing facilities in Tamil Nadu and one in Pondicherry. Based on its leadership in PVC resin (a specialty paste), underpenetrated market and vertical integration, we gave the company a score of 15 out of 27. We had a major concern regarding the company, i.e., its poor financial position as the company had negative equity, high long-term debt and trade payables.

Our rating for Chemplast Sanmar was based on the following factors:

  • Out of 11 business metrics, the company did well on six.
  • Out of six management-related metrics, the company did well on four.
  • Out of eight financial metrics, the company did well on four.
  • Out of two valuation metrics, the company did well on one.

Stock performance since listing
Chemplast Sanmar received muted reception from investors as the issue was subscribed 2.2 times in total. The institutional portion was subscribed 2.7 times, high networth individuals' portion was subscribed 1.03 times, and the retail portion was subscribed 2.3 times.

Due to a muted interest from investors, the company was listed at Rs 525, which is at a loss of 3 per cent. Although post IPO, the share price rallied to its all-time high of Rs 826. It then started to tumble and currently trades at Rs 534, which is 1.7 per cent more than its list price.

Business performance
Chemplast Sanmar came out with impressive results for Q3FY22. Its revenue increased by 33.5 per cent and profits increased by 48 per cent on a YoY basis. Decrease in inventories by Rs 241 crore during the quarter was a major reason for this profit jump. The company said that an increase in demand for specialty PVC paste and suspension PVC were the reasons for growth in revenue.

The company's chairman, Vijay Sankar, also said that they are looking to expand investments in specialty PVC and are going to double the capacity by 50 per cent. This will help them meet the increasing demand instantly.

What to do now?
Chemplast Sanmar's leadership in specialty PVC paste and reasonable valuation compared to its peers really attracted investors. It was one of the reasons for such a huge jump in share price after listing. But as the share price came down, the company reverted back to its IPO valuations. The company is trading at a price to earnings of 20.5 times compared to peers' average level of 43.7 times. Due to negative net worth, the company is currently trading at a price to book value of -47.6 times.

The increasing demand on all fronts shows the business potential and how the company also has the capability to meet the demand. Their Egyptian chemical business under TCI Sanmar is also performing well. Investors can consider investing after due diligence regarding products, use cases, financials and valuations.

Disclaimer: This analysis is not intended to serve as a recommendation. Readers must do thorough research before investing in this company. If you are interested in our stock recommendations, please visit Value Research Stock Advisor.

Also read:

Chemplast Sanmar IPO: Information Analysis

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