PANAMA PETROCHEM

Smorgasbord of petroleum products

Established in 1982, Mumbai-headquartered Panama Petrochem is one of the leading manufacturers and exporters of over 80 variants of petroleum speciality products. These products are used by diverse industries, including printing, textiles, rubber, pharmaceuticals, cosmetics, inks & resins, and the cables, among other things. The company’s diverse range of products includes white oil, liquid paraffin, oil, petroleum jelly, transformer oil, ink and coating oils, rubber process oil, industrial oils and greases, automotive oils, drilling fluids, waxes and other petroleum speciality products.

Panama Petrochem has four manufacturing plants located at Ankleshwar (Gujarat), Daman (Union territory), Dahej (Gujarat) and Taloja (Raigarh district in Maharashtra). The company also has a subsidiary, Panol Industries RMC, in the FZE located at Ras al Khaiman in the UAE to cater the GCC and MENA regions, which enjoys a logistics advantage as it is situated on the port and has direct dedicated pipeline arrangements.

The company has made rapid strides on the financial front, with sales turnover during the last 12 years almost trebling from Rs 584 crore in fiscal 2012 to Rs 2,249 crore in fiscal 2023 with operating profit shooting up almost seven times from Rs 44 crore to Rs 309 crore and the profit at net level surging over seven and a half times – from Rs 31 crore to Rs 223 crore. What is more, prospects for the company going ahead are all the more encouraging. Consider:

CLIENT LOYALTY

• At home, the company’s pro-customer approach is paying rich dividends. Over the years, it has formed strong relations with its clients, comprising leading names across sectors. Its ability to offer customized products complying with global quality standards has enabled it to generate business not only from existing clients but from new clients through business referrals.

• The company follows an aggressive export policy to expand its business geographically and quantitatively. Its Dahej (Gujarat) plant is fully computerized and built on DCS/ PLC systems to meet international quality and manufacturing standards. The Ankleshwar plant has a fully equipped and DSIR-approved R&D centre. Thus, its high-quality products have enabled the company to explore overseas markets and by now it exports to more than 75 destinations, including the US, the UK, Europe, the Middle East, Australia, Africa and South East Asia. Last year (fiscal 2023), exports contributed around 35.61 per cent of its total revenues. Its UAE subsidiary, Panol Industries, is also active in expanding the export business, particularly in the Middle East and Africa.
• With the rising demand for its products, the company is in expansion mode.

BONUS FRIENDLY

• Panama Petrochem is in a financially sound position, with reserves at the end of March 2023 standing at Rs 940 crore, over 28 times its equity capital of Rs 12 crore, that too after a 1:2 bonus issue in 2017. The company believes in maintaining a investor-friendly approach and pays regular dividends, raising the quantum from 15 per cent in fiscal 2004 to 150 per cent in fiscal 2023. Interestingly, it follows a conservative payout ratio of 25 per cent of its profit after tax.

• The company is on a healthy growth and has sharpened its R&D edge to develop new products, It has of late come out with products for drilling companies worldwide. The management expects global sales of these products to be Rs 200 crore within the next 2-3 years. The R&D wing is continuously busy in turning out value-added products which now account for 68 per cent of total sales. The management has targeted raising this to 85 per cent in the next 3-5 years. In FY 2024, we expect the company to register EPS of Rs 29.1 and EPS of Rs 40.5 in FY 2025. The scrip trades at Rs 330. P/E on FY 2025 EPS works out to 8.2

PERFORMANCE INDICATORS (Rs. in crore)

GUJARAT PIPAVAV PORT

Raking in the maritime moolah

Promoted by APM Terminals (belonging to the Maersk group), Gujarat Pipavav Port is the first private sector port which operates an all-weather port located on the southwest coast of Gujarat at a distance of 140 km from Bhavnagar and around 152 nautical miles northwest of Mumbai. The port lies on a strategic international maritime grade route connecting India to various geographies.

The company is doing very well on the financial front. During the last 13 years, its sales turnover has expanded by more than two and a half times – from Rs 396 crore in fiscal 2011 to Rs 917 crore in fiscal 2023, with operating profit also expanding by more than two and a half times from Rs 182 crore to Rs 503 crore and the profit at net level shooting up more than 5 times – from Rs 57 crore to Rs 292 crore. What is more, prospects for the company going ahead are all the more promising. Consider:

• First of all, the company has a strong parentage. The lead promoter, APM Terminals, which holds a 44.01 per cent equity stake in GPPL, operates one of the world’s most comprehensive port networks. It is uniquely positioned to help both shipping line and landside customers grow their business and achieve better supply chain efficiency flexibility and dependability. It is on the path to being the world’s best terminal company. And its management is confident of achieving this by constantly lifting the standard of its consumers’ experience at each of its 62 key locations around the globe. APMT has a team of over 20,000 industry professionals focused on delivering the operational excellence and solutions that businesses require to reach their potential.

STRATEGIC LOCATION

• GPPL has a substantial geographical advantage. Pipavav Port is on the west coast of India for containers, bulk and liquid cargo. Its promoter, APM Technology Terminals, is one of the largest container terminal operators in the world. Pipavav lies at a strategic international maritime location which connects India with the Far East on the one side, and Middle East, Africa, Europe and the US on the other.
• The company has great scalability potential. In fiscal 2012, it had a 570,500 TEUs container handling capacity, which has been steadily raised to 1.35 million TEUs by now. Today its bulk cargo capacity is 4-5 million tonnes and its liquid cargo capacity is around 2 million tonnes. The scaleup in container volumes has raised the size and stature of the company, pushing up its topline as well as the bottomline.
• GPPL’s container volumes are benefiting from the uptick in market growth as well as the constraints in JNPT. The increase in EXIM container volumes of 14% yoy was higher than the 10-11% growth for the sector. JNPT is growing EXIM container volumes at a pace slower than the high teens growth seen in container volumes of Mundra and non-major port volumes. JNPT is potentially losing out (mid-single-digit yoy growth) in a market for container volumes that has started to grow >10% yoy.

LOGISTICS INFRA

• GPPL is planning to build capacities in warehousing. As a result its joint venture RPCL is looking at growing the CTO business. At the same time, the parent company, the Maersk group, is planning to build an end-to-end logistics infrastructure in India and this would benefit Pipavav Port Ltd. Thus, GPPL remains a play on the growing logistics sector in India.
• During the last year (fiscal 2023), the company has added there service lines. This is expected to boost the EXIM business going ahead.
• The company’s financial position is very sound, with reserves at the end of March 2023 standing at Rs 1,595 crore – over three times its equity capital of Rs 483 crore. The company is virtually a debt-free entity and its interest burden last year was negligible at around just Rs 8 crore. In FY 2024, we expect the company to register EPS of Rs 8.1 and EPS of Rs 9.1 in FY 2025. The scrip trades at Rs 214. P/E on the FY 2025 EPS works out to 23.5.

PERFORMANCE INDICATORS (Rs. in crore)