CIC - A brief Valuation

Company background in brief
Chemical Industries (Colombo) Limited (CIC) is a leader in the fields of Agri business, Paints & chemicals. It is quoted in the Colombo Stock Exchange and is listed among the top ten companies.
CIC is a leader in the fields of Agri business, Paints and Chemicals. It is quoted in the Colombo Stock Exchange and is listed among the top ten companies.

CIC Agri Businesses comprises of companies that provide inputs to the agricultural sector and that includes Fertilizer, Seed, Agro Chemicals, Planting Material, Agricultural Machinery, Advisory Services etc.

CIC Agribusinesses also manages two of Sri Lankas largest Government farms at Hingurakgoda and Pelwehera where % of the country's Seed Paddy requirement is produced.

Industrial Chemicals Division serves industries such as Paint, Printing Ink, Packaging, Rubber Products, Food and Personal-care, Cleaning, Leather and Textile through locally manufactured as well as imported products of our principal suppliers.

ICI Group is one of the world's largest producers of specialty products and coatings with operations in 55 countries. ICI Group has 45,000 employees worldwide. For more information about ICI Group,

Chemanex Limited which is listed in the Colombo Stock Exchange is a subsidiary of CIC. It is engaged in trading imported and locally produced chemicals and industrial intermediates with foreign collaboration and assistance. It also provides Company Secretarial, Depot Management and handling Services to Group Companies.

subsidiaries & Associates

1. CIC Paints (Pvt) Ltd. - A member of ICI Paints world group that markets surface coatings for the decoration and protection of homes, vehicles and industrial structures.

2. Speciality Packaging (Pvt) Ltd. - Manufacture of Polyethylene Terephthalate containers for domestic & export market.

3. CIC Agri Businesses - Importation, blending and marketing of fertilizers.

4. Chemanex Ltd. - Diversified, Mainly in chemicals.

5. CIC Vetcare (Pvt) Ltd. - Importation and Marketing of Animal Health Products, Feed Ingredients and Poultry Equipment.

6. CIC Feeds (Pvt) Ltd. - Manufacturing and Marketing Animal Feeds. Breeding of Day Old Chicks.

7. CIC Environmental Management Liquid (Pvt) Ltd. - Process, Engineering, Designing and Construction of treatment plant for Municipal use and industrial waste water.

8. Link Natural Products (Pvt) Ltd. - Manufacture of Natural Healthcare Products, Ayurvedic

Financials;

Current assets - 10807 Mn (An increase over 13.7% YOY over 2009)
Current Liabilities - 8401.24 Mn (An increase of 12.9% YOY over 2009)

So the working capital is positive on CIC..

Net assets per share as stated Rs. 60.57 as of 31 Dec 2010.
Total value of Dividends Paid in 2010 - 1.85

Total voting Shares - 72.90 Mn
Total Non Voting Shares - 21.87 Mn

Shares held by Public;
Ordinary Shares 33,801,629 (46.36%)
Non Voting (Class - X) Shares 21,028,435 (96.15%)

Revenue to Equity holders of the Company;

31-12-10 - 382.67 Mn
30-09-10 - 218.63 Mn
31-06-10 - 157.70 Mn
Total for 3 Qtrs = 759 Mn. Hence Annualized Earnings = 1012 Mn

Total voting Shares - 72.90 Mn
Total Non Voting Shares - 21.87 Mn

Total Shares = 94.77 Mn

EPS = 1012/94.77 = 10.68

C&P Sector PE = 19

Current Price;
Voting - 150
Non-voting - 108.70

Current PE = 180/19 = 7.89 = 2.4X to Sector PE..

Looking at segmental breakdown of revenue from 1-3 Qtrs;

CIC - Segmental Revenue 30-06-2010 30-09-2010 31-12-2010
2010 2009 2010 2009 2010 2009
Construction Industry 151.64 110.45 337.99 248.08 576.17 410.35
Agricultural & Livestock Industry 2,987.44 2,929.93 6,032.5 5,463.67 11,059.12 8,987.12
Industrial Raw Material 234.01 231.59 497.76 443.78 722.15 704.85
Packaging Industry 144.5 114.5 312.99 238.66 500.76 369.2
Consumer & Pharmaceutical 746.6 589.13 1,739.98 1,292.68 2,790.89 2,056.39


All sectors have Qtr-Qtr growth and contributed on revenue growth. However its not be noted that Primary support came by strong growth in agricultural & livestock segment earnings as well as Consumer & Pharmaceutical segment which contributed a higher portion for the revenue growth last qtr..

Therefore; if we take a revenue growth approach; the coming sector revenue could be calculated as follows;
If we take differences of Qtr-Qtr growth its 60.93 & 164.04 respectively from June to December, the last quarter being highly profitable.
So the median of these values = 112.485
Assuming the coming qtr results would be higher as well, adding the median value to the last qtr produces a hypothetical value of Rs. 495.155/- Mn for the coming Qtr.

Hence the forecasted 4Qtr results would look like the following;

31-03-11 - 495.155 Mn
31-12-10 - 382.67 Mn
30-09-10 - 218.63 Mn
31-06-10 - 157.70 Mn

New Total = 1254.1 Mn
EPS forecasted = 1254.1/94.77 = 13.23

30% discount based on Sector PE of 19 = 13.3

Hence revaluation on this basis would suggest a fair value of = 13.23*13.3 = Rs. 175.96/-

Also the sectors the company has diversified into shows a potential growth and we can expect more from CIC in coming months and years as well. A good solid investment in-deed in my opinion.