7,000 per cent returns: Heavy buying in this high ROE & high ROCE multibagger chemicals stock - Rockets over 5 per cent today; Here’s why!

The stock gave multibagger returns of 360 per cent in 3 years, 960 per cent returns in 5 years and a whopping 7,000 per cent in a decade.

Today, the stock market was trading in green with the BSE Sensex Index and the NSE Nifty-50 Index both gaining over 0.50 per cent each. Along with the market in green, shares of Fineotex Chemical Ltd (FCL) rocketed over 5 per cent to an intraday high of Rs 380.60 per share with a spurt in volume by more than 2 times on BSE from its previous closing of Rs 359.80. The stock is down by 17 per cent from its 52-week high of Rs 458 per share and gained 43 per cent from its 52-week low of Rs 265.95 per share. The stock is trading above 50 DMA & 200 DMA (DMA stands for Daily Moving Average).  

The company's Board of Directors allotted 9,70,000 equity shares with a face value of Rs 2 each for Rs 346 per share (Rs 33,56,20,000 in total) on a preferential basis to non-promoter category entities. These shares have the same rights as existing equity shares. Additionally, the Board allotted 26,26,600 convertible warrants at Rs 346 each (including a Rs 86.50 warrant subscription price and a Rs 259.50 warrant exercise price) for a total of Rs 90,88,03,600 to both promoter and non-promoter categories. Each warrant can be converted into a company equity share with a face value of Rs 2 upon paying the remaining Rs 259.50 per warrant within 18 months of allotment. Both the equity shares and warrants will be locked in for a specific period as mandated by regulations. Due to the equity share allotment, the company's issued, subscribed, and paid-up share capital increased from Rs. 11,07,64,989 to Rs 11,17,34,989. However, there's no change in capital due to the warrant allotment.

Furthermore, the company is into expansion and growth and is currently in advanced discussions to acquire a speciality chemicals manufacturer. This potential acquisition aligns perfectly with Fineotex's existing business, as the target company's products and customers. Negotiations and due diligence are ongoing, reflecting Fineotex's commitment to internal growth and strategic acquisitions that create value for stakeholders. It's important to note that the finalisation 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.

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Fineotex Chemical Ltd, founded in 1979, is a leading manufacturer of speciality chemicals for various industries. Their core business is textile chemicals, focusing 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 has 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 4,200 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 gave multibagger returns of 360 per cent in 3 years, 960 per cent returns in 5 years and a whopping 7,000 per cent in a decade. 

Disclaimer: The article is for informational purposes only and not investment advice