In a special edition of SIP Stocks’ – Strong Investment Portfolio - Zee Business Managing Editor Anil Singhvi along with Zee Business Research Analyst Ashish Chaturvedi discussed why this specialty chemical stock, Valiant Organics, would give bumper returns in both the short and long term. 

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While discussing the fundamentals, Chaturvedi says, Valiant Organics manufactures chemicals for a variety of industries such as speciality and agro chemicals, cosmetics, pharmaceuticals. He adds, the company has completely integrated itself backward and forward in the last few months, moreover, it has quite a strong promoter and management background. 

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The company’s Chairman Chandrakant Gogri is the founder of Aarti Industries and has a good amount of experience in this segment, says Chaturvedi. Valiant Organics is the subsidiary company of Aarti Drugs and Aarti Industries. 

Due to forward and backward integration, the company’s margins are better than the whole chemical sector, it has given a major focus to the capacity expansion in the last two years, says Chaturvedi. He further says, In FY1, the company has spent around Rs 436 crore in capacity expansion as compared to FY18, similarly, its focused assets and capital work in progress in both we have seen a huge surge. 

The company’s debt-equity is comfortable, explains the analyst, adding further he says, the company has planned its expansion on its internal sources of funds and restricted itself from borrowing. 

Besides, the investors have continued to show their confidence in Valiant Organics as Foreign Institutional Investors has a 1.85 per cent stake and Domestic funds have around 2.65 per cent holding.  

Chaturvedi also adds, the company has lucrative valuations as compared to the industry. The Industry’s average PE is 30x as compared to the company’s forward PE at 20x, moreover the return on capital employed is at 42 per cent. He mentions, the company has reported 78 per cent revenue and 58 per cent profit Compound Annual Growth Rate in the last five years. 

Terming it as a splendid and magnificent company, Singhvi points out four factors why this company’s shares should be bought. He says, the company is into spectacular business, strong promoter background, increased capacity expansion with internal funds.  

Singhvi adds, there is a structural bull run in the company, it may show some correction but has a huge scope for growth. He predicts, the investors and traders will be surprised to see the growth as well as the results of the company in the next couple of years. 

The Market Guru set a target of Rs 1800-1950 per share on a short term basis and raises a target of Rs 2200-2500 per share on the long-term basis. He urged, investors this stock is a must in the portfolio.