Monday, November 16, 2009


OVERVIEW: Food shelf life is a primary concern for both food manufacturers and marketers. A food product’s ability to uphold standards of safety and quality for prolonged periods directly affects sales and customer satisfaction. Antioxidants are designed to reduce the development of oxidative rancidity which limits the shelf life of oils, margarine, snacks, dressings, meat products and other products. Apart from extending shelf life, antioxidants also ensure a consistent quality from batch to batch providing a minimum of variation in taste, odour, color and texture of the product. Consumer’s interest in and awareness of the health properties of antioxidants has been rising in recent years. Not only has this increased global sales of antioxidants (whether used as a food preservative or to provide a health enhancing or functional benefit), but demand for foods recognized as being naturally rich in antioxidants are also growing. One company which intensively understands the complex processes and interactions resulting from lipid oxidation in foodstuffs is Mumbai based Camlin Fine Chemicals Ltd (CFC) as it is engaged in manufacture of food antioxidants. Apart from manufacturing food antioxidants this company is also involved in manufacture of Industrial Antiocidram (used in industries like paints, polymers, resins and plastics), artificial sweetener (Sucralose), bio diesel additives, natural shelf life enhancers (used for fruits, flowers and vegetables).

INVESTMENT RATIONALE: In order to give an idea of the company’s plans going forward in the food antioxidants segment it shall be prudent to quote what the management has said in the annual report - “This business unit is the biggest contributor to the company in terms of volume and growth and the company is also the world’s largest manufacturer of Food grade antioxidants, TBHQ and BHA with market share of about 35% world wide and 70% in India. The company has laid out an aggressive plan for increasing world wide market share above 50% by making an entry into growing food processing markets like Asia, Middle East and South America”. Under the industrial antioocidarm, CFC has plans to launch three products which have already gone through trial runs and technology transfer at plant levels. Seeing the huge market potential for these products the company has already created adequate capacity for these products. The artificial sweetener business of the company also has a bright future because of the growing health awareness. Sucralose, the new age sweetener has begun business in South America, Europe, India and Central America. CFC has filed a process patent for this product.

The company is also involved in manufacture of products under bio diesel additives segment which enables stabilizing of the fuel from oxidation. The world wide demands for these products are in excess of 70 million metric tones. The natural products preservation has been the focus worldwide. CFC has also ventured into this segment and has developed products, though under initial trials. This product shall help in maintaining color, freshness, aroma and prevents spoilage when in transportation and storage. The company expects to file patents for this and many more new products also. Through its subsidiary the company is also engaged in Nutraceuticals like gluosamine and its salts which are used as a supplement in bone management in conditions like osteoarthritis. The company has in the last three years grown at an average growth of 23% and this was primarily due to enhancing its product basket in the food antioxidants product range. One can expect this growth to be maintained in the near future as CFC has ambitious products in the pipeline to be launched soon.

INVESTMENT CONCERNS: Delay in product development could affect future growth and Competition from China could be a major cause of concern.

VALUATION: At the current market price of Rs.65 CFC’s projected FY 10E EPS of Rs. 9.1 is
discounted 7x. Long term investors can add this to their portfolio.

To read the full report: CAMLIN FINE CHEMICALS