(NSE Code:IOLCP, BSE CODE: 524164) (CMP: Rs.82.3)COMPANYPROFILEIOLChemicals and Pharmaceuticals Limited (IOLCP) a one of the largest players in SpecialtyOrganic Chemicals and Bulk Drugs (API’s), headquartered in Ludhiana (Punjab).IOLCP operates in two business segments, Specialty organic chemicals and BulkDrugs with its manufacturing facility at Barnala (Punjab). IOLCP has itsfootprints in 56 counties and regularly supplying its high quality products to major pharmaceutical players like Sanofi Aventis (India and Hungary), Aristo Pharmaceuticals, Prati Donaduzzi E Cia Ltda (Brazil), Cipla, BASF (USA), UPL, Abbot India andZIBO XINUA-Perrigo Pharmaceutical (China). With its backward integrated USFDAaccredited Ibuprofen plant, IOLCP has emerged as favorable supplier abroad.IOLCPL Product mix includes Pharmaand Speciality ChemicalsIOLCPL Product mix includes Pharma and SpecialityChemicals – IOLCPL has 2 business divisions which include theSpeciality Chemicals and APIPharma unit. Within the Pharma product basket, IOLCPL has the largest Ibuprofen Plant by capacitywhich is approved by USFDA and EDQMwith a 17% global share. IOLCPL has a integrated plant with backward integration consisting ofabout 50% raw material cost having a installedcapacity of 7200 TPA. In FY17, the Pharma business accountedfor 55% of total revenues totaling Rs 411 crs with Ibuprofen accounting for 80%of the Pharma sales. Also IOLCPL makes other pharma products like Lamotrigene,Metformin HCI, Fenopfibrate and Clopidogrel Bisulphate. Within the pharma basket,IOLCP has well established customers like Sanofi Aventis, Abbott, Cadilla,Indoco Remedies, Granules, Aristo Pharma, Tabuk, Alkem Labs, Kern Pharma andCipla etc.It is the world's onlybackward-integrated Ibuprofen producer (7,200 TPA) that manufactures allintermediates and key starting materials at one location. It has augmented itspharma business by moving up the value-chain with entry into lifestyle drugsfor pain management, anti-depressant, antidiabetic, anti-platelet andanti-convulsion.IOLCP is diversifying its API productsportfolio. Besides its multipurpose plant, it has a 17 MW power generationplant for captive consumption with adequate backups for trouble-free operations.It R&D lab is DSIR approved and is fully equipped to validate the existingprocesses.EthylAcetate is having varied uses in different industries like pharmaceuticals,flexible packaging and printing ink manufacturing, paints and adhesives etc.IOLCPL’s key markets in chemicals are African countries, Middle East, SAARCCountries and Russia. Since inception, IOLCPL has been gradually enhancing itsmanufacturing capacities. Moreover, other chemicals produced by IOLCPL such asIso Butyl Benzene (IBB), Mono Chloro Acetic Acid (MCA) and Acetyl Chloride areused in manufacturing of Ibuprofen. IBB, MCA and Acetyl Chloride are keystarting materials for Ibuprofen where IOLCPL is a dominant player and isforward integrated with Ibuprofen plant. These chemicals are also directly orindirectly used in various industries viz.Pharmaceuticals, Dye, paints, flexible packaging, Ink, Drilling, etcWithinthe speciality chemicals product basket, IOLCPL has well established customerslike AkzoNobel, BASF, Sun Pharma, ITC, Strides Shashun, Granules, DIC, NectarLife, UPL, Uflex, SinoChem Pharma etc. IOLCPL has established itself as largestproducer of Ibuprofen in India and second largest in world. It is the onlycompany in world with backward integration facility for Ibuprofen. In Iso ButylBenzene also niche segment, IOLCPL is the second largest producer in world.Moreover,IOLCPL has also received the European Directorate for Quality of Medicine andHealthcare (EDQM) – Certificate of Suitability (COS) and ANVISA certificationfrom Govt. of Brazil. This enables the company to directly enter into Europeanand Brazil market. IOLCPL is recognized as “TRADING HOUSE” fromMinistry of Commerce and Industry, Government of India. Export sales ofthe company have a niche market for its products in overseas markets andaccounted for Rs 196 crs in FY17 from Rs 132 crs last yearshowing a growth of48% YoY and is presently selling into around 56 countries.IOLCPLenjoys the following certifications to cater to the Export Markets –· USFDA Certification Year 2015, EUGMP CertificationYear 2013. · ANVISA certification Year 2012, · Certificate of Suitability from EDQM for IBUPROFEN, CEP No. 316-2008· Certificate of Suitability from EDQM for LAMOTRIGINE, CEP No. 066-2013· Certificate of Suitability from EDQM for METFORMIN HYDROCLORIDE, CEP No.188-2013· Certificate ofPharmaceuticals Product(COPP)-WHO-GMP for IBUPROFEN.Ministry of Health (MOH)approval by Japan/Philippines/ Iran / Ukraine.· Kosher & Halal Certificate for all finishedproducts· Pre-Reach certification for all chemical products andIntermediates.· ISO9001:2008, 14001:2004 & 18001:2007· Certificate ofStar Trading House Status for Export, from Govt. of IndiaPHARMAINDUSTRY OVERVIEW Indianpharmaceutical industry is a highly knowledge based industry and is rankedworld class in terms of technology, quality, purity, stability and internationalsafety, health and environmental protection in production and supply of bulkdrugs. Pharma sector plays a major role in the Indian economy as it caters toaround 70% of the country’s total medicines demand including drugintermediates, bulk drugs, tablets and capsules.Thegovernment of India has aggressively granted 100% FDI in drug & Pharmasector to establish various Pharma SEZs across the country. Exports have beenthe cornerstone of growth for Indian pharmaceutical industry, with overseas pharmaceuticalsmarket particularly developed markets offering strong growth opportunities todomestic companies. Indian pharmaceutical industry is an important contributorto the foreign reserve of the country with around 50% of industry revenuecoming from overseas market. The US market accounts for highest revenue for theIndian pharma industry as the country has the largest number of USFDAs approvedplants for generic manufacture.CHEMICALINDUSTRY OVERVIEW India’schemical industry is one of the largest and most diversified industries in the country. It consists of several small industries that cover hundreds ofsegments. Chemicals are generally used to make a wide variety of consumer goodsand are also used in agriculture, manufacturing, construction, and service industries.Thechemical industry itself consumes 26% of its own output. Major industrialcustomers include rubber and plastic products, textiles, apparel, petroleumrefining, pulp and paper, and primary metals. With the chemical industrycontributing indirectly to almost every sector of the economy, it plays a vitalrole in a country’seconomic growth.Projects planned by IOLCPL in thecurrent year and going ahead During the year under review, IOLCPL has successfullycompleted commissioning of extra capacity for its chemical products likeLamotrigene, Metformin HCI, Fenopfibrate and Clopidogrel Bisulphate which wasdone at a cost of Rs 16.48 crs and was fully financed internally.Also IOLCPL is planning to set up a green fieldfacility of producing a anti diabetic product namely Metformin which will doneat its existing facility at a cost of Rs 10 crs which will also be funded fullyby internal accruals.Further the IOLCPL management has also stated that ititends to further ramp up Ibuprofen capacity from 7200 TPA to 12000 TPA overthe next 2 years as well as increasing the capacity of other ancilliarychemical products like Ethyl Acetate, MCA and Acetyl Chloride. The total costis estimated at Rs 200 crs which will be funded by a mix of internal accruals,debt and equity.Howeverthe management has also made it clear to us that it will be not be in a hurryto start capex immediately and will look at incremental capex as stated aboveonly after it gets a optimal return on new invested capital and hence theseplans as of now are only on the drawing board table.FINANCIALSNAPSHOTIt has an equity base of Rs.56.21crorethat is supported by reserves of around Rs.133.15crore. For Q2FY18, IOLCP’s netprofit zoomed 352 % to Rs.4.43crore on 26% higher sales of Rs.217.79crorefetching an EPS of Rs.0.79.During H1FY18, its net profit soared 333%to Rs.7.41crore on 30% higher sales of Rs.433.10crore fetching an EPS of Rs.1.32and CASH EPS of Rs.3.89.FOLLOW US ON OUR TELEGRAM CHANNEL FORAMAZING FACTS AND NEWS RELATED TO INDIAN MARKETShttp://t.me/FundamentalBlastersFOLLOW US ON OUR TWITTER HANDLEhttps://twitter.com/FundamentalGems