Camlin Fine Sciences - Hidden Player In Food Industry

Much like the surge in demand led to growth in the steel industry in the 19th century, the growing demand for
processed food is creating larger opportunities in food protection business. At the heart of food protection business, is food preservation and shelf life extension. Food protection is a complex business encompassing elements of basic chemistry, food chemistry, bio-chemistry and bio-technology.

Camlin, the corporate group was established in 1931 and is a pioneer in art & stationery material in India. Camlin diversified into Pharmaceuticals and Fine Chemicals two decades ago.
Camlin Fine Sciences Ltd. is focused on a vision to be the largest food antioxidant and ingredient manufacturer worldwide. They will achieve the mission by placing the needs of their customers first, creating quality products, innovating technology, and fostering continuous improvements in employees, products, and processes.

The company primarily operates in Food division, but it also has a good presence in Industrial Products and Agri Products division. The food division of CFS has taken a leadership position globally in the synthetic food antioxidant segment, mainly because of its 2 anti-oxidants, TERT-BUTYL HYDROQUINONE (TBHQ) and BUTYLATED HYDROXYANISOLE (BHA).
To achieve stability, in availability of raw materials and supply of products to customers, on 8th March 2011, company acquired Borregaard, Italy S.p.A, now called CFS Europe. After that, the company has become the world's largest integrated manufacturer of TBHQ and BHA.

Salient features of TBHQ
- ANTOX (TBHQ) gives excellent antioxidant potency to edible oils and fats.
- Minimizes nutritional losses in edible oils.
- Maintains freshness and quality of crude oils during long distance transportation.
- Broadens the range of oils in food processing.
- Offers carry through protection to fried foods, thus enhancing their storage life and freshness.
- Facilitates use of saturated oils, thus preventing excess levels of cholesterol in oils and fats.

Salient Features of BHA
- The most effective antioxidant, imparting excellent stability for an array of food products, fats, shortenings, vitamins, pet foods, cosmetics pharmaceutical products and packaging materials
- ANTOX BHA, reduces the oxidative deterioration of edible oils and fats, loss of flavour, colour and nutritive value of foods
- ANTOX BHA, THE BETTER ANTIOXIDANT : BHA normally is a mixture of 2 isomers, 2 tert butyl and 3 tert butyl isomers 3 tert butyl isomer has better antioxidant property
- White free flowing crystalline Flakes
- Stable to heat and mildly alkaline conditions
- 20% colorless solution in propylene glycol remains colorless even when heated at 1940F for 1hr.
- ANTOX BHA SYNERGISTIC EFFECT : ANTOX BHA gives greater synergistic effect with TBHQ, BHT and propyl gallate than that which might be expected from contribution of each individual antioxidant

The applications of these 2 anti-oxidants are plenty and can be viewed in detail on company's website, in product details section. To add to that, in the Food business, Vanillin – the aroma compound manufactured by the Company, is also poised to take a larger share of the market.

Camlin Fine Sciences management is expected to increase its market share in high growth evolving markets like
China ,India, Latin America and Middle East , where the food processing industry has been growing at a higher rate when compared with the Global market. The company is continuously focusing on Research & Development and new product launches in food antioxidants sector.

On the products front, in the industrial Products business, the Company launched downstream products such as
TBC, Guaiacol and Veratrole. These value-added products have been developed with technical expertise of CFS
Europe, and hold a high growth potential. The agri-products division has started commercialisation of the products developed by CFS in India and has obtained success in high cash crops and fruits. The division has appointed dedicated technical sales teams who are assisting farmers and cooperatives to develop better farming practices and CFS products are helping in reducing damage to crops.

Talking about numbers now, the company has been growing at a very good pace over last 5 years, and this year seems no different.
In FY'13, the company achieved total sales of 316.4 Cr vs 255.62 Cr in FY'12, growth of 24%.
In FY'13, the net profit was at 14.76 Cr Vs 10.14 Cr in FY'12, growth of 46%.

For the nine months ended this year, the company has achieved
Total sales of 263.77 Cr vs 232.39 Cr last year, a growth of 14%.
Net profit of 15.57 Cr Vs 10.7 Cr last year, a growth of 46%.

I am expecting FY'14 to end with total sales of 365 Cr and net profit of 20.5 Cr approx, which will be a very good achievement. Recently, the company made an aggregate investment of 80.46 Lakhs by acquiring the share capital of SOLENTUS. Hence SOLENTUS has become the 100% subsidiary of the company.
Also, Camlin Fine Sciences plans to set up a wholly owned subsidiary in Canada for undertaking trading and distribution of antioxidants, food ingredients, blends and formulations in the US and Canadian markets.

My Views:
At a market cap of 115 Cr, the stock looks very attractive, with the kind of business expertise they have, and the scope available in the operating sector. I mentioned about the stock earlier also, in the comment section of earlier post, but was waiting for the company to declare its numbers before posting the details. The numbers came in line with the expectations, along with the news of setting up new subsidiary in Canada, which attracted me more towards the company for a good long term investment prospect. On 14th Feb, the managing director of the company, Mr. Ashish Dandekar, bought around 43,000 shares from the open market, which is also encouraging. The company has been a very good dividend payer also over the years. A range of 15-26 Rs in last 12 months suggests that the stock has been very steady, with very less volatility, but its about time, the stock comes into the eyes of big investors, with its continuous performance, which will take the stock to higher levels.
One can expect good returns over next few years in the stock. Not giving any specific target for now.