Emkay Global

Camlin Fine Sciences (Buy)

Target: ₹115

CMP: ₹93.85

Camlin Fine Sciences (CFIN) has commissioned the Diphenol manufacturing plant at Dahej, Gujarat, at a total cost of ₹180 crore (as per estimates). CFIN has started production of Hydroquinone (HQ) and Catechol (CT), key raw materials for the business, at this facility.

The company will produce HQ and CT at the lowest cost in the world at the Dahej facility, which shall benefit margins to the tune of $1-1.5/kg (300-400 bps). It also plans to gradually add downstream products such as MEHQ and Ethyl Vanillin. Such incremental capacity plans would enhance its addressable market share and expand its footprint globally.

The commissioning of the Dahej plant would also lead to a structural reduction in inventory days, given that the bulk of HQ will be sourced from the India plant. CFIN currently imports HQ from Italy, which takes about 49 days to reach India.

Dahej remains the key catalyst for margin expansion, while improvement at subsidiaries will maximise the benefits. We expect revenue, EBITDA and PBT to grow at 18 per cent, 27 per cent and 45 per cent CAGR respectively over FY20-23.