Thread by @mohan_koushik1

#Sadhananitro
It started in the year 1973 and has built a strong reputation of manufacturing quality products along with excellence in service to clients worldwide.

1/n

Sadhana Nitro Chem Ltd is engaged in manufacturing of chemical intermediates, heavy organic chemicals and performance chemicals and wireless network equipment and services.

2/n

Current products: Nitrobenzene, Meta Amino phenol (MAP), Metanilic acid, Aniline, Ortho Aminophenol, Para Amino Phenol, Ammonium sulphate, diethyl keto acid etc.
Currently 99% of revenue comes from chemical intermediates and 35-38% Revenue is from MAP with 50%+ exports

3/n

What actually I like about Sadhana?
5years of hardwork to start producing PAP and the opportunity that the company is having with great technology process superiority and also team understanding to convert the batch process to continuous process (RM to PAP is just 10Hrs)

4/n

5 Key Triggers:
1.PAP
2.PLI Scheme (36,000 TPA)
3.Expanding Downstream Capacities
4.Forward Integration plan to produce Paracetamol (Indians favourite drug)
5.All other business in one Thali

5/n

1.PAP
PAP – Para Amino Phenol which is the main API for Paracetamol, and we all know how we use Paracetamol and its just a pain killer and used for Fever

6/n

Demand for this product is very high in the world and also in India, And China is the only source with 95% marketshare (160000 TPA World demand for PAP)

7/n

Now we have Sadhana who has entered into PAP by NitroBenzene route with the help of a scientist and company is doing great work here

8/n

2.PLI Scheme
Government of india is helping to get cost benefits worth of Rs. 58crs over the periods for Sadhana with an approval PAP Plant of 36000TPA

Committed Investment by Sadhana = 198Crs

9/n

PAP through Nitro Benzene is one step process and its one of the best way to produce PAP

Do read the research report to understand Nitro Benzene to PAP

researchgate.net/publication/35…

10/n

3.Expanding Downstream Capacities
More than 80% of PAP Worldwide is used to manufacture Paracetomol,7% is used in RUBBER Anti-Oxidant,5% in Dyes and others etc.

Company is also focusing on Dyes segment and wants to keep expending its customers.

11/n

Focus is more on raw material, and they believe the end product will he at high quality.
2 ways to produce PAP
A.PNCB
B. NB

12/n

4.Forward Integration plan to produce Paracetamol (Indians favourite drug)
In recent Annual concall company told it wants to get into Paracetamol and its just 1 step process from PAP

13/n

For this company need FDI approval and I expect this to happened in next 2 years then the revenue mix will be like
•PAP – 40%
•Paracetamol – 40% (High margin business)
•Other business – 20%

14/n

5.All other business in one Thali
I expect around 300crs of top line by FY2027 from other business for Sadhana

My numbers (FY 2027 5Year view)
36,000 X 1000 X 450Rs = 1,620 Crs
36,000 X 1000 = PAP
450Rs = PAP Price per KG

economictimes.indiatimes.com/mobile?utm_sou…

15/n

I am taking margin of safety upto 35% in sales and expecting around 1000crs sales only from PAP

PAT Margins I expect to be around 20%
Total Sales = 1000 + 300 = 1300crs
PAT Margins 20% = 260crs

16/n

Sales CAGR = 50%+ for next 5 years
PAT CAGR = 80+ for next 5 Years
Expected Price to Earnings FY27 = 25

17/n

Risk:
1.If prices for PAP go down from 450Rs
2.For sales of 33000TPA PAP company need to invest 300Crs
a.100Crs from Internal Accruals
b.100Crs Debt
c.100Crs Equity capital

18/n

3.If company can’t sell its PAP (We need to track every quarterly number) (Clients tracking)
4.High Risk high reword game (Assuming PE to be 25)
5.Any other risk can come

19/n

Disclaimer: This is only for educational purposes & not a recommendation & I am writing this only on a request from one of my friends in twitter.
I may or may not hold the stock personally and I love to understand business so thought of keeping track of it.

Thanks for reading

Be careful my understand can also be wrong
And don't buy by just reading this do your own research and take your own call.

I am just sharing my thoughts only.