Mid to Long Term Stock Recommendation – BEPL

Bhansali Engineering Polymers Ltd – CMP 114

  • Bhansali Engineering Polymers Ltd is engaged in manufacturing and sale of ABS Resins, AES Resins, ASA resins, SAN resins and their alloys with other plastics in the Indian market.
  • Its customers include leading companies dealing in Automobiles, Home Appliances, Electronics, Healthcare and Kitchenware.
  • The equity base is low at 17 crore.
  • The company’s reserves have steadily increased to close to 1000 crore in 2020 over past 10 years while borrowings have decreased to zero from 56 crores in 2011, making it a debt free one.
  • From year 2016, company’s operating profits started jumping above 30 and since has been so.
  • This stock is an under researched and lesser known and invested one because of the low capital base. Its market capitalization is merely 1899 crore.
  • The recent surge in valuations in chemical companies’ shares has yet to affect positively to many small players in this segment like Himadri Chemicals and BEPL as well.
  • This firm does not look like onetime wonder or simply chemical fad and fancy thematic play but a long term investment idea looking at its past 10 years financials. If an investor is awry of long term valuation and business prospects of chemical sector then definitely for one Bull Run this stock is all poised to give 5 bagger returns.
  • Chart Analysis: In monthly chart, we can see it gave huge breakout in 2017 and broke through its decade old 40 resistance and surged above 200 only to fall to 40 again in two years only due to swings in profitability (Net period declined form 100 cr to 47 cr in 2019 and 67 cr in 2020). The figure for 2021 and 2022 is well above 400 crore.
  • You can relate the price moves with the change in top line and that with stringent tightening of pollution norms on chemical sector in china since 2016, which is ten times than India in this sector. Alone specialty chemical industry is 300 billion USD while whole Indian chemical space is 160 USD billions out of which specialty segment is about 20%.  
  • Yes, this stock does not fall under definition of blue chip and we do not usually recommend chemical or commodity business firms. However, this stock along with having a zero debt status commands many positives in its favour on financial statements. 
  • In nutshell, a low and steady paid up capital status, high profitability, high promoter holding (>55%), debt free status, high reserves, decent book value (60 Rs./Share), low valuation (a PE ratio of 5.50 at current price) on standalone as well as peer comparison basis makes it a good high return calculated bet.