Why is Shivalik Rasayan going up?
Shivalik Rasayan Limited is one of the few outperforming small-cap stocks in the agrochemical sector that has beaten Sensex as well as its industry peers by a huge margin.
Shivalik Rasayan has gone up by 127 per cent in one year while being up by 69 per cent in just one month.
The stock after its run-up is looking expensive with P/E of 50.80 versus the industry P/E of 30.17. The stock did not impress with its latest results as its sales and profits dipped on a YoY basis.
Despite this, why is the stock an apple of investors’ eye?
When it comes to Shivalik Rasayan, one of the most important aspects is its team of focussed and technically-qualified members, who have proven capabilities to run and execute complex chemical plants.
The key business segments for the company are the manufacturing of agrochemicals and active pharma ingredients (APIs). Shivalik Rasayan holds 44.77 per cent in Medicamen Biotech Ltd (a manufacturer of pharma formulations including oncology) which in turn, holds 75 per cent in Opal Pharmaceuticals Pty Ltd, Australia. Opal Pharma markets and distributes pharma products in Australia and New Zealand.
Agrochemical domain: Shivalik Rasayan is one of the largest producers of Dimethoate Technical in India and the second-largest producer of Malathion Technical in India. The company owns 20 acres of prime location land for Dehradun Plant.
Pharmaceutical domain: The company owns a fully-integrated pharma facility including R&D, API, and formulations. The facilities are USFDA and EU standard-compliant facility and boast of its one-stop solution provider for direct commercial production, R&D, pilot scale batches, contract manufacturing (CMO), and contract research (CRO) services.
The company has been doing very well when it comes to agrochemicals business. However, the stock is in the limelight as its API segment is expected to start commercial production soon. In Dahej (Gujarat), the company is expected to start production in a phased manner and for this; the company has already developed some oncology APIs and non-oncology APIs while some are under development.
Medicamen Biotech bought Opal pharma for Rs 2 crore in September 2019 while the company in its recent declarations (Q4 FY20) highlighted that Opal Pharma clocked Rs 8 crore worth sales with PBT of Rs 1.5 crore, just in one quarter.
Shivalik Rasayan is in the right business segment (APIs) at the right time with the right product offering, catering to the growing markets, which is triggering the interest in the stock. The commencement of the new factory at Dahej is the main trigger leading to the bullishness in the counter.