Established in 1988, Chemcon Speciality is the only manufacturer of Hexamethyldisilazane (HMDS) in India and 3rd largest in the world. Besides, it is the largest player of Chloromethyl Isopropyl Carbonate (CMIC) in the country and 2nd largest worldwide. Both these chemicals are predominantly used in the pharmaceutical industry.
According to the company’s prospectus, HMDS and CMIC constituted 43.8 per cent and 13 per cent of the total revenue from the pharmaceutical chemicals segment (which contributed 57.4 per cent towards total revenue from operations) in FY20.
"Post Covid-19, there has been anti-China sentiment across the world which, we believe, will benefit Chemcon given that it has already expanded capacity for HMDS and is likely to increase capacity for CMIC in the coming time. It is evident that the company could likely to capture import share in the years to come in a view that it maintains pricing dynamics in line with the Chinese players," analysts at ICICI Securities said in an IPO note.
After today's bumper listing, analysts have turned cautious on the stock given the stock's stretched valuation post debut. Notably, the share price of Chemcon pared its listing gains partially, and was trading at Rs 614 on the BSE.
"Even at the IPO price, the company had stretched valuations. Plus with the sharp run up today, the valuation currently is quite expensive. While the long term growth story is intact as the company is a leader in its category, one needs to have 2-3 year view to hold the stock. If not, we would recommend to book profit and wait for the correction to re-enter," says Ajit Mishra, VP Research at Religare Broking.
That said, Keshav Lahoti, associate equity analyst at Angel Broking continues to be positive on the company due to its position as a leading manufacturer of its products globally. "It also has a long standing relationship with diversified customers. Chemcon's expansion plan of increasing their total installed production capacity by approximately two-third of the current capacity gives us good revenue visibility for the next few years," he says.
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