Ashish Kacholia’s Portfolio High ROE & High ROCE Chemicals Stock: This small-cap company is into expansion and growth of the business; details inside!

The stock is down by 20 per cent from its 52-week high of Rs 458 per share while it is up by 45 per cent from its 52-week low of Rs 250.85 per share.

Fineotex Chemical Ltd is seeking funds to fuel expansion and growth and is currently in advanced discussions to acquire a specialty chemicals manufacturer. This potential acquisition aligns perfectly with Fineotex's existing business, as the target company's products and customers complement their own. Negotiations and due diligence are ongoing, reflecting Fineotex's commitment to both internal growth and strategic acquisitions that create value for stakeholders. It's important to note that the finalization of the acquisition depends on completing due diligence and other relevant factors.

India's chemicals industry ranks 6th in production and 14th in exports. It is the backbone of numerous sectors like agrochemicals, pharmaceuticals, textiles, paper, paints, and soaps, with a current valuation of USD 220 billion. Projecting a growth of approximately 9 per cent per annum during 2020-25, the industry is expected to reach USD 300 billion by FY25 and a staggering USD 1 trillion by FY40.

Fineotex Chemical Ltd, founded in 1979, is a leading manufacturer of speciality chemicals for various industries. Their core business is textile chemicals, with a focus on research and development through their subsidiary Biotex Malaysia. They also offer cleaning and hygiene products like sanitisers and detergents. Fineotex boasts over 470 product categories, including chemicals for every stage of textile production, oil and water-based drilling fluids, and home care disinfectants. With a presence in over 70 countries and a network of over 100 dealers, they serve major clients like Nahar Group and Raymond in the textile industry.

An ace investor, Ashish Kacholia with a portfolio of over 2,900 crore and currently holding 42 stocks owns 31,35,568 shares or 2.83 per cent stake in the company. This company's stock price is valued in line with its industry peers based on its price-to-earnings ratio, while also demonstrating strong profitability with a return on equity of 29 per cent and a return on capital employed of 36 per cent.

The company did well last year (FY23), making Rs 517 crore in sales, a profit from operations of Rs 119.90 crore and a net profit of Rs 89.55 crore. Looking at the most recent quarters (Q1FY24, Q2FY24, Q3FY24), their sales total Rs 415.95 crore, operating profit is Rs 122.48 crore and net profit is Rs 90.55 crore. This means to hit their yearly numbers (FY24) from last year, they only need Rs 101.05 crore more in sales in the last quarter (Q4FY24). The good news is their operating profit is already Rs 2.58 crore higher than this point last year and their net profit is Rs 1 crore higher. Overall, the company has been doing well with sales of over Rs 100 crore each quarter for the last 2 years, operating profits consistently in the double digits, and net profits also in the double digits.

This company is financially strong with a market cap exceeding Rs 4,000 crore and minimal debt. Furthermore, it has shown impressive profit growth averaging 31.1 per cent annually over the past five years. It has improved its working capital efficiency by reducing debtor days from 107 days to 71.6 days and lowering working capital requirements from 115 days to 76.1 days. The stock is down by 20 per cent from its 52-week high of Rs 458 per share while it is up by 45 per cent from its 52-week