Chemcon Speciality Chemicals got a stellar listing on the stock exchanges in October 2020 with a massive 115% premium to the issue price of Rs 340 to list at a whopping price of Rs 731. Analysts tracking the company have been advising their investors to book profits at the listing price of over Rs 700 on the back of higher valuation and limited upside potential. And most analysts have been proved right as in the last three months; the stock price of Chemcon Speciality Chemicals has slipped from the earlier Rs 700 levels to the current Rs 410 levels. It had come out with a Rs 318 crore public issue and received an overwhelming response from all categories of investors and was oversubscribed by nearly 150 times. The company is a specialty chemicals manufacturer of pharmaceutical chemicals (HMDS & CMIC) and oil well completion chemicals (inorganic bromides). It is the only manufacturer of HMDS in the country and the third largest manufacturer of HMDS worldwide. In the CMIC segment again the company is the largest player in India and second largest producer in the world. Additionally, Chemcon Speciality Chemicals is the only manufacturer of zinc bromide in the country as well as the largest producer of calcium bromide. The prospect of the company is quite bright as the shifting of supply chains from China will substantially benefit companies like Chemcon in a big way. New product launches and expansion plans at its existing manufacturing facility in Vadodara, Gujarat, should significantly increase the manufacturing capacity by over 60%, thereby enabling economies of scale over the next couple of years. There is very high entry barrier for the products such as involvement of complex chemistry in the manufacture of its products, long gestation period resulting in few manufacturers, products subject to high quality standards and stringent impurity measures, plus requirement of high degree of technical skill and expertise. These expansion plans for the manufacture of pharma chemicals will reduce dependence on China as India is a net importer of HMDC / CMIC. The Chemcon Speciality stock currently quoting at Rs 410 is a good portfolio buy for investors looking at a one-year time perspective. It can deliver a 30% price appreciation on the back of accumulation by FIIs and fund managers on fundamental grounds.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.