Alufluoride CMP 103- A Safe & High Potential Multibagger

May 18, 2018

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Strategic Alpha

aluflu

Alufluoride Ltd (AL) is a producer of high-quality Aluminium Fluoride (ALF3) chemicals with its plant located at Vizag, Andhrapradesh.
Aluminum Fluoride is added as a flux in the process of primary Aluminium Production. This is of critical importance as it lowers electricity consumption during the smelting process. Consequently, primary Aluminium Smelters are the biggest users of ALF3. Alufluoride is the only Company producing high-purity Aluminium Fluoride having a technology association with Alusuisse, Switzerland. This technology facilitates the conversion of Fluorine effluents from Phosphatic Fertilizer Complex into Hydrofluosilicic Acid and then to Aluminium Fluoride- (Waste to Wealth)

For more info check, http://www.alufluoride.com/

NUMBERS-The Latest
Market cap: 71 Cr CMP on Day18May 2018: Rs 103 FV: 10 BV: 33 Apx.

Revenue: 49.67 Cr FY18- Up 38% YoY Net profit:6.46Cr FY18 Up 80% YoY

Aluminum Fluoride – a high purity, free-flowing and dust-free powder, is produced with modern technology by reacting dry Alumina Hydrate with Hydro-fluosilicic acid, generated from the fluorine recovery unit of the fertilizer complex. Fluorine gases, otherwise an affluent are scrubbed with water to produce Hydro-fluosilicic acid – thus converting “Waste Into Wealth”.

POSITIVES
1. Company Enjoys Debtfree Status.
2. Attractive Valuations: Company is currently Trading at 11 Times FY18 and 7 Times FY19.
3. Company has recently Gone Through Capacity Expansion by 60% taking the total Capacity to 12000 MT which will have a Revenue Visibility of 80 Crores for FY19 on 70% Capacity Utilization. Capex was done on Internal Accruals.
4.Raw Material Sourcing constraints eased as the company has recently concluded 20 Year contract agreement for the supply of raw materials from coromandel, Pradeep phosphates, and IFFCO.
5.Aluminium Fluoride Prices are on the rise for the past 6 months due to supply-side constraints from China due to environmental issues that act as icing on the cake for Alufluoride.

INTERESTING INFO
1.Company has a Very Low Equity of 70 Lakh Shares of FV 10 Each- A Must for a Multibagger Stock
2. Company Posted Highest Ever Profit, Highest Ever Margins in Q4 FY18.
3. Company has a Niche for its product as only 2 Companies Manufactures Aluminium Fluoride( Tanfac Industries and SPIC) Other than Alufluoride.
4.Taking the Overall Capacity of SPIC, Tanfac, and Alufluoride it only caters to 14% of Total Indian Demand hence Hugh scope for Import Substitution and Creating of Additional Capacity. This could give High Revenue Growth Visibility for 5-6 Years considering Capex Every 3 Years.
5. Company holds Mutual Funds of Approx 11 Crores, Equity Shares worth 2.5 Crores Approx, Cash and Cash Equivalents of 2.75 Crores Totaling 15 Crores which Creates Capital for Future Expansion Keeping Debt-Free Status.

NEGATIVES – POSSIBLE RISKS
1.Though Raw Material Constraints are eased due to their 20 Year Contract, it could be problematic if any adverse Raw Material availability Scenario prevails as the company historically suffered through the same before the contract signed.
2. Currently Chinese Environmental Policy and their production cut on polluting industries like Aluminum Fluoride are acting as a tailwind for the company, any adverse change in this scenario can impact margins of the company due to a drop in Aluminum Fluoride Prices.

MY TAKE
Alufluoride is a Niche Specialty Chemical Company with High Entry barriers. It has huge potential for its products from Aluminium Industry and possible demand from Lithium-Ion Batteries (Still in the research stage- Aluminium Fluoride as New Cathode). With just 14% Of Indian ALFL3, Demand is produced in India, there is huge room for Import substitution, Its Debt-Free Status, Capex Becoming Operational, Very Low Equity, Cash Rich status Makes this Company a Bargain Hunt at Current Valuations.

The journey for Alufluoride is yet to begin. This stock can immensely reward its investors. Shareholders who give this stock adequate time and display patience can well get to see the levels of 250-300,400.

It is just a matter of time. Alufluoride is an Obvious Potential Multibagger!!

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The author of the blog Mr.Suyog Dhavan is a Full-time Investor / Value Trader and Value investing/Trading Mentor. His style of Investing is inspired by Mohnish Pabrai, Peter Lynch, and Porinju Veliath. He is the founder of Strategic Alpha Wealth, A Premier stock market mentorship firm with a mission to touch the lives of 1Lakh people through its mentorship program.

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