Valuation Project_himadri_final

Valuation of Himadri Specialty Chemical Ltd. Presented by Ankita Das Podder (2021BLP008) Arnab Chakraborty (2021BLP013) Kaustav Palit (2021BLP025)

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About Himadri Speciality Chemical Ltd (HSCL) is the largest coal tar pitch manufacturer in India with >70% market share in the space Leverages on its deep knowledge of one of the most versatile substances – Carbon The company has established itself as one of the world's most extensive value chains in the Carbon segment.  Competitors: Deepak Nitrate, Nocil Ltd, Solar industries, Bhansali Engg etc

DCF By applying DCF method, the total valuation of the company came out as Rs. 3002,18,63,652.05 Year

Time Growth Rate

EBIT

NOPAT

Depreciation

Change in WC

CAPEX

FCFF

ke

kd

D/E WACC

TV

PV

₹ 24,905.87 ₹ 16,203.76

₹ 3,924.38

9.30%

₹ 27,222.12 ₹ 17,710.71

₹ 4,002.87

₹ 168.68

₹ 8,223.87 ₹ 13,321.03 12.05% 6.47% 0.48 8.29%

₹ 12,301.76

2

9.30%

₹ 29,753.77 ₹ 19,357.80

₹ 4,082.92

₹ 184.37

₹ 8,223.87 ₹ 15,032.49 12.05% 6.47% 0.23 10.24%

₹ 12,368.52

2023

3

9.30%

₹ 32,520.87 ₹ 21,158.08

₹ 4,164.58

₹ 201.52

₹ 8,223.87 ₹ 16,897.28 12.05% 6.47% 0.00 12.05%

₹ 12,012.15

2024

4

9.30%

₹ 35,545.31 ₹ 23,125.78

₹ 4,247.88

₹ 220.26

₹ 8,223.87 ₹ 18,929.53 12.05% 6.47% 0.00 12.05%

₹ 12,010.06

2025

5

9.30%

₹ 38,851.03 ₹ 25,276.48

₹ 4,332.83

₹ 240.74

₹ 8,223.87 ₹ 21,144.70 12.05% 6.47% 0.00 12.05%

₹ 11,973.14

2026

6

9.30%

₹ 42,464.17 ₹ 27,627.19

₹ 4,419.49

₹ 263.13

₹ 8,223.87 ₹ 23,559.69 12.05% 6.47% 0.00 12.05%

₹ 11,906.32

2027

7

8.86%

₹ 46,227.56 ₹ 30,075.65

₹ 4,507.88

₹ 274.07

₹ 8,223.87 ₹ 26,085.59 12.05% 6.47% 0.00 12.05%

₹ 11,765.49

2028

8

8.43%

₹ 50,122.23 ₹ 32,609.53

₹ 4,598.04

₹ 283.63

₹ 8,223.87 ₹ 28,700.06 12.05% 6.47% 0.00 12.05%

₹ 11,552.96

2029

9

7.99%

₹ 54,125.75 ₹ 35,214.21

₹ 4,690.00

₹ 291.56

₹ 8,223.87 ₹ 31,388.78 12.05% 6.47% 0.00 12.05%

₹ 11,276.81

2030

10

7.55%

₹ 58,212.24 ₹ 37,872.88

₹ 4,783.80

₹ 297.60

₹ 30,000.00 ₹ 12,359.08 12.05% 6.47% 0.00 12.05%

₹ 3,962.77

2031

11

7.11%

₹ 62,352.59 ₹ 40,566.59

₹ 4,879.47

₹ 301.52

₹ 10,000.00 ₹ 35,144.54 12.05% 6.47% 0.00 12.05%

₹ 10,057.09

2032

12

6.68%

₹ 66,514.62 ₹ 43,274.41

₹ 4,977.06

₹ 303.10

₹ 10,000.00 ₹ 37,948.37 12.05% 6.47% 0.00 12.05%

₹ 9,691.90

2033

13

6.24%

₹ 70,663.47 ₹ 45,973.66

₹ 5,076.60

₹ 302.14

₹ 10,000.00 ₹ 40,748.12 12.05% 6.47% 0.00 12.05%

₹ 9,288.05

2034

14

5.80%

₹ 74,761.95 ₹ 48,640.13

₹ 5,178.14

₹ 298.47

₹ 10,000.00 ₹ 43,519.79 12.05% 6.47% 0.00 12.05%

₹ 7,43,239.00

₹ 1,60,051.61

2035

15

5.80%

₹ 79,098.15 ₹ 51,461.25

₹ 5,281.70

₹ 315.79

₹ 10,000.00 ₹ 46,427.17 12.05% 6.47% 0.00 12.05%

 

 

 

₹ 3,00,218.64

2020

0

2021

1

2022

₹ 24,671.60

 Value of Company 

*All Figueres in Lakhs

Working Capital Calculation Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Revenues ₹ 1,81,378.53 ₹ 1,98,246.73 ₹ 2,16,683.68 ₹ 2,36,835.26 ₹ 2,58,860.94 ₹ 2,82,935.01 ₹ 3,09,247.96 ₹ 3,36,655.07 ₹ 3,65,018.25 ₹ 3,94,174.09 ₹ 4,23,934.23 ₹ 4,54,086.55 ₹ 4,84,396.83 ₹ 5,14,611.08 ₹ 5,44,458.53 ₹ 5,76,037.12

WC (1% of sales) ₹ 1,813.79 ₹ 1,982.47 ₹ 2,166.84 ₹ 2,368.35 ₹ 2,588.61 ₹ 2,829.35 ₹ 3,092.48 ₹ 3,366.55 ₹ 3,650.18 ₹ 3,941.74 ₹ 4,239.34 ₹ 4,540.87 ₹ 4,843.97 ₹ 5,146.11 ₹ 5,444.59 ₹ 5,760.37

Change in WC ₹ 168.68 ₹ 184.37 ₹ 201.52 ₹ 220.26 ₹ 240.74 ₹ 263.13 ₹ 274.07 ₹ 283.63 ₹ 291.56 ₹ 297.60 ₹ 301.52 ₹ 303.10 ₹ 302.14 ₹ 298.47 ₹ 315.79

*All Figueres in Lakhs

Assumptions Parameter Growth Rate

Percentage 9.30%

Source https://www.ibef.org/industry/chemical-industry-india.aspx

GDP (2035)

5.80%

https://economictimes.indiatimes.com/news/economy/indicators/india-tobecome-5th-largest-economy-in-2025-3rd-largest-by2030/articleshow/79964750.cms?from=mdr#:~:text=%22Growth%20will %20naturally%20slow%20as,in%202030%2C%22%20it%20said

Tax Rate Risk Free Rate of Return (Rf)

34.94%

Financial Report

6.03%

Financial Report

Market premium (Rm-Rf)

8.98%

Damodaran

Beta

0.67

https://www.moneycontrol.com/india/stockpricequote/chemicals/himadrisp ecialitychemical/HCI01

Capex

1/3rd of year 0 investment till 2029.

Industry standard

D/E ratio

the company is trying to get debt free. After applying regression, it is observed that there is a strong relation between time and D/E ratio. Predicted the D/E ratio for 2021 and 2022 and then took the value for subsequent years

 

Working Capital

1% of sales

Industry standard

Relative Valuation Using the method the company valuation came as Rs. 23,09,81,21,511.69 Valuation ratios Deepak Nitrite

NOCI Solar Industries L

Bhansali Engg

Industry Average Value for Himadri Weights Weighted Average

ROA

0.27

0.09

0.15

0.10

0.15

₹ 2,78,46,13,881.83

0.35

₹ 97,46,14,858.64

P/E

8.59

8.34

30.94

7.14

13.75

₹ 28,27,99,01,247.80

0.18

₹ 4,94,89,82,718.36

P/B

0.92

0.92

5.97

1.34

2.29

₹ 39,65,84,74,425.00

0.30

₹ 11,89,75,42,327.50

P/S

1.25

1.29

3.68

0.43

1.66

₹ 30,15,41,80,612.50

0.18

₹ 5,27,69,81,607.19

Value of Company Revenue EPS Number of Shares Total Equity BVPS Earnings

₹ 18,13,78,53,000 ₹ 4.91 418807782 ₹ 17,33,70,38,000 ₹ 41.40 ₹ 2,05,63,46,209.62

₹ 23,09,81,21,511.69

Himadri Speciality Chemical Ltd ROA P/E P/B P/S

0.03 6 0.71 0.69

APV Using APV method, the valuation of the company came as Rs. 42588604812.49 Year Time Growth Rate

EBIT

NOPAT

Depreciation

₹ 24,905.87

₹ 16,203.76

₹ 3,924.38

Change in WC

CAPEX

FCFF

ke unlevered

kd

D/E

WACC

TV

PV

₹ 24,671.60

2020

0

2021

1

9.30%

₹ 27,222.12

₹ 17,710.71

₹ 4,002.87

₹ 168.68

₹ 8,223.87 ₹ 13,321.03

10.61%

6.47%

0.48

7.54%

₹ 12,042.72

2022

2

9.30%

₹ 29,753.77

₹ 19,357.80

₹ 4,082.92

₹ 184.37

₹ 8,223.87 ₹ 15,032.49

10.61%

6.47%

0.23

9.14%

₹ 12,285.83

2023

3

9.30%

₹ 32,520.87

₹ 21,158.08

₹ 4,164.58

₹ 201.52

₹ 8,223.87 ₹ 16,897.28

10.61%

6.47%

0.00

10.61%

₹ 12,484.67

2024

4

9.30%

₹ 35,545.31

₹ 23,125.78

₹ 4,247.88

₹ 220.26

₹ 8,223.87 ₹ 18,929.53

10.61%

6.47%

0.00

10.61%

₹ 12,644.06

2025

5

9.30%

₹ 38,851.03

₹ 25,276.48

₹ 4,332.83

₹ 240.74

₹ 8,223.87 ₹ 21,144.70

10.61%

6.47%

0.00

10.61%

₹ 12,768.36

2026

6

9.30%

₹ 42,464.17

₹ 27,627.19

₹ 4,419.49

₹ 263.13

₹ 8,223.87 ₹ 23,559.69

10.61%

6.47%

0.00

10.61%

₹ 12,861.44

2027

7

8.86%

₹ 46,227.56

₹ 30,075.65

₹ 4,507.88

₹ 274.07

₹ 8,223.87 ₹ 26,085.59

10.61%

6.47%

0.00

10.61%

₹ 12,873.82

2028

8

8.43%

₹ 50,122.23

₹ 32,609.53

₹ 4,598.04

₹ 283.63

₹ 8,223.87 ₹ 28,700.06

10.61%

6.47%

0.00

10.61%

₹ 12,804.91

2029

9

7.99%

₹ 54,125.75

₹ 35,214.21

₹ 4,690.00

₹ 291.56

₹ 8,223.87 ₹ 31,388.78

10.61%

6.47%

0.00

10.61%

₹ 12,660.61

2030 10

7.55%

₹ 58,212.24

₹ 37,872.88

₹ 4,783.80

₹ 297.60

₹ 30,000.00 ₹ 12,359.08

10.61%

6.47%

0.00

10.61%

₹ 4,506.64

2031 11

7.11%

₹ 62,352.59

₹ 40,566.59

₹ 4,879.47

₹ 301.52

₹ 10,000.00 ₹ 35,144.54

10.61%

6.47%

0.00

10.61%

₹ 11,585.41

2032 12

6.68%

₹ 66,514.62

₹ 43,274.41

₹ 4,977.06

₹ 303.10

₹ 10,000.00 ₹ 37,948.37

10.61%

6.47%

0.00

10.61%

₹ 11,309.24

2033 13

6.24%

₹ 70,663.47

₹ 45,973.66

₹ 5,076.60

₹ 302.14

₹ 10,000.00 ₹ 40,748.12

10.61%

6.47%

0.00

10.61%

₹ 10,978.29

2034 14

5.80%

₹ 74,761.95

₹ 48,640.13

₹ 5,178.14

₹ 298.47

₹ 10,000.00 ₹ 43,519.79

10.61%

6.47%

0.00

10.61%

₹ 9,64,256.16

₹ 2,45,458.31

2035 15

5.80%

₹ 79,098.15

₹ 51,461.25

₹ 5,281.70

₹ 315.79

₹ 10,000.00 ₹ 46,427.17

10.61%

6.47%

0.00

10.61%

 

 

 

 

 

 

 

 

 

 

 

 

₹ 3,97,264.31

 

 

*All Figueres in Lakhs

 

 

₹ 39,72,64,31,178.08

APV Contd.. Growth Rate GDP Tax Rf Rm-Rf b ke kd b unlevered ke unlevered PV of Tax Benefits on debt Bond Rating Probability of Bankruptcy Expected BCs Expected BCs APV

9.30% 5.80% 34.94% 6.03% 8.98% 0.67 12.05% 6.47% 0.51 10.61% ₹ 28,955.44 AA 0.28% 30% ₹ 333.70 ₹ 4,25,886.05

*All Figueres in Lakhs

Reason behind choosing DCF model Manufacturing business valuations are based upon 2 main criteria: • Based on the historical cash flow • Based on the income producing assets • Howsoever, in this case we choose DCF model over the other models because• Manufacturing firms invest heavily in developing new products and processes. • The levels of capital investment needed, and the accuracy of sales projection make a major difference to the manufacturing firm’s income prospects. • Therefore, it is essential to capture these elements in the cash flow forecast and business risk assessment. -So, we consider the DCF model of valuation.

Analysis •From the time of inception into the stock market the stock price of Himadri has grown steadily y-o-y till 2016. After that it experienced a steep growth during 2016-18. •After that it again started to fall after 2018. Especially the stock price has started falling steeply due to the pandemic in 2020. •This is due to the fall in the international trade due to which the carbon black division was highly affected. Carbon black is one of the most important verticals contributing to their revenues. •Therefore, in the subsequent years, the stock price of Himadri may increase due to the increased demand of carbon black which would be mainly consumed due to the potential increase of lithium ion batteries for the EV.

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