Multibase India Ltd-sound growth prospects

Multibase India Ltd ( BSE Code :526169) is currently in its 20th year of operations.

Primary products:  Thermoelastic Elastomers, Thermoplastic master batches.

Plant location: Daman

Market positioning : Market leader in its category of products.

Parentage : 75% subsidiary of Multibase SA, France which in turn is a subsidiary of Dow Corning, USA

Multibase India  is a specialty and technical chemicals manufacturing company. It is engaged in the manufacture and distribution of thermoplastic elastomeric compounds and silicon enhanced products. The company offers a wide range of polypropylene compounds, thermoplastic masterbatches, thermoplastic elastomers, and siloxane masterbatches. Its product rangeincludes TPSiV, a thermoplastic silicone vulcanizate; Siloxane Masterbatches, Multibatch, Multi-Flex, Nylex, Multi-Pro, and Multi-Flam.

User industries for primary products of Multibase:

Automotive

Asthetics: Car mats, IP/DP center console skins, control panel knobs, seat belt housing, hand brake, cup holder, A/C grills and components

Fluid Transportation:Air Duct Housing, Window cleaning duct

Safety: Driver Airbag covers,Passenger Airbag Covers, Knee Airbag Covers , Side Airbag Covers, curtain Airbag Covers

Weather Seals: Static & semi dynamic glazing seals, Acoustic Seals, Asthetic seals, Thermal seals

Structural parts: Dash board, Door panel, centre console,Wheel trims

Consumer:

Health, Personal Care, Cosmetics: Tothbrushes, Razor handles, Hairbrush handles, cosmetic packaging

Houseware:kitchen utensil,small appliances ( irons,kettle), washing machine

Sports: swimming accessories ( flippers,mask, snorkel)

Personal electronics: Mobile phone housing, ear buds,key board

Industrial:

Wire & Cables:Optical fibre,pipe extrusion,HFFR  wire & cables

Electrical protection:Electrical switch,Electrical housing, Electrical contactor

Fluid & product delivery:gaskets and seals,water cooler seals,flexible plumbing,hose & tubing

Packaging: Carrier bags, woven sacks,Stationery (interleaf sheets, folder covers), thermoformed food trays, Corrugated PP boards

Window seals & gaskets: window seal, door seal, refrigerator seal

Financials:

Paid up Equity Capital : Rs 12.62 crore

Debt: Rs.0.93 crore

2009-10:

Revenue: Rs.32.84 cr

Profit before tax: Rs.3.50 cr

Net profit: Rs.2.70 cr

EPS: Rs.2.13

Dividend: Nil

6-months ended Sept 2010:

Revenue: Rs.19 cr ( 10% growth yoy)

Profit before tax: Rs.1.53 cr ( 25% de-growth yoy)

Net profit: Rs.1.02 cr ( 48% de-growth yoy)

Key Catalysts:

1)   Increased volumes/sales :The company has been increasing its presence in the Automotive sector in India. It offers  a wide gamut of applications to this sector, as detailed above. Increased volumes will have a high positive impact on bottomline.

2)   The current installed capaicity is 6000 TPA. Current capacity utilization is less than 30% of the installed capacity. So, Multibase can  over the next 3-4 years comfortably reach a 100 cr plus turnover without any capacity expansion.

3)  Delisting – though this is more in the nature of optimistic speculation, it canot be ruled out considering the growth prospects.

4)  Mandatory Air Bags in 4 wheelers: It is expected that over the next 3-4 years, Air bags as a safety feature  may become mandatory for all new 4 wheelers , just as seat belts were made mandatory a few years back. The proposal is currently with the Ministry of road  transport and highways and may come up for consideration when the amendments to the Motor Vehicle Act are notified.

At the current price of Rs.29 per share, the company may seem overpriced on the traditional PE scale. However if one considers the growth prospects for its products , market leader status and strong parentage, it appears a good investment.

At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.