At a Glance
GHCL makes ~98% of its revenue from soda ash (a base chemical used in glass, detergent, and dyes). It runs a rock-solid OPM of ~28%, throws ₹600+ Cr in annual profit, pays 2% dividend — and still trades at a dirt-cheap 9.2x P/E. So why is promoter holding just 19%? And why has sales growth been negative?
1. 🎯 Introduction with Hook
Everyone loves a low P/E, high ROCE stock… until they realize it’s in commodities.
GHCL’s core soda ash business has solid fundamentals — margins, returns, low debt — yet the stock refuses to rerate. Why? Because unlike SRF or Deepak Nitrite, it’s not in a hot specialty segment. It’s literally the haldi of the chemicals world: useful, underappreciated, and available in bulk.
But is that actually a hidden moat?
2. ⚙️ Business Model – WTF Do They Even Do?
GHCL = Soda Ash Monopoly Lite™
- 98% of revenue is from soda ash
- Key end users: glass, detergents, chemicals
- GHCL is the 2nd largest producer in India after Tata Chemicals
- Also makes a small amount of bicarbonate and industrial salt
- Has a well-integrated setup in Gujarat
In short: no pharma dreams, no fancy ESG innovation, just good ol’ chemical cash flows.
3. 💰 Financials Overview – Profit, Margins, ROE, Growth
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 2,491 | 3,052 | 4,551 | 3,447 | 3,183 |
| Net Profit (₹ Cr) | 326 | 650 | 1,142 | 794 | 624 |
| EBITDA Margin | 24% | 24% | 33% | 25% | 28% |
| ROCE | 16% | 19% | 36% | 21% | 25% |
| ROE | 34% | 23% | 22% | 19% | 19% |
🔥 Profits have doubled in 4 years, but sales are down 30% from FY23 peak
🔥 OPM of 28% is elite in commodity space
⚠️ 3Y Profit CAGR = -1% → margin compression risk
4. 📊 Valuation – Is It Cheap, Meh, or Crack?
- CMP: ₹601
- P/E (TTM): 9.25x
- Market Cap: ₹5,776 Cr
- Book Value: ₹364 → P/B = 1.65x
- ROE: 19.3%
- Dividend Yield: 2%
📉 Fair Value Range (EduCalc):
Let’s assume FY25 PAT = ₹624 Cr
Apply a 10–12x P/E (reasonable for cyclicals with stable cash flow)
FV Range = ₹6,240 – ₹7,488 Cr
➤ FV per share = ₹650 – ₹780
🟩 CMP ₹601 = Undervalued Territory
The market is clearly pricing in margin decline or industry slowdown. But balance sheet health and FCF suggest it’s too pessimistic.
5. 🍛 What’s Cooking – News, Triggers, Drama
- FY25 AGM on July 24, dividend record date: July 17
- Filed BRSR Report for FY25 — ESG becoming relevant for chemicals
- Capex in bicarbonate segment and capacity expansion in soda ash
- Increased other income in FY24 and FY25 (~₹80–270 Cr) — one-time gains?
Also noteworthy: Despite solid profit, institutional shareholding is declining. Why?
6. 🧾 Balance Sheet – How Much Debt, How Many Dreams?
| Metric | FY25 |
|---|---|
| Net Worth | ₹3,489 Cr |
| Borrowings | ₹119 Cr |
| D/E | 0.03 (basically debt-free) |
| Cash & Investments | ₹650+ Cr |
| Total Assets | ₹4,185 Cr |
🟢 Low leverage
🟢 Capex funded via internal accruals
🔴 No expansion into new product lines (risk of stagnation)
7. 💸 Cash Flow – Sab Number Game Hai
| FY | CFO | CFI | CFF | Net Cash Flow |
|---|---|---|---|---|
| FY23 | ₹856 Cr | -₹409 Cr | -₹530 Cr | -₹83 Cr |
| FY24 | ₹797 Cr | -₹571 Cr | -₹338 Cr | -₹112 Cr |
| FY25 | ₹638 Cr | -₹358 Cr | -₹230 Cr | ₹50 Cr |
📌 Steady operating cash flow
📌 Moderate capex (~₹350–₹500 Cr/year)
📌 Dividend + buybacks + capex = well-managed cash discipline
8. 📉 Ratios – Sexy or Stressy?
| Ratio | FY25 |
|---|---|
| ROCE | 25% ✅ |
| ROE | 19.3% ✅ |
| Interest Coverage | ~39x ✅ |
| Debtor Days | 24 ✅ |
| Inventory Days | 217 ❌ (very high) |
| CCC | 183 days ❌ |
Long working capital cycle due to soda ash supply chain. Not fatal, but slows FCF velocity.
9. 💵 P&L Breakdown – Show Me the Money
FY25:
- Revenue: ₹3,183 Cr
- EBITDA: ₹876 Cr
- Net Profit: ₹624 Cr
- EPS: ₹65.18
- Dividend Payout: ~18% (₹13–15 per share)
Margins are solid. But top-line shrinkage is a concern.
10. 🕵️ Miscellaneous – Shareholding, Promoters, KMP
- Promoter Holding: Just 19.03% 😬
- FII: 26%
- DII: 10%
- Public: 44%
- No. of Shareholders: 1.08 lakh
🧑💼 Board and Management:
- No known controversies
- Consistent AGM activity
- Divested textile business earlier → focus on core chemicals
But 19% promoter holding = low skin in the game. That’s rare for a ₹6000 Cr company.
11. 🧠 EduInvesting Verdict™
✅ What We Like:
- Dirt cheap valuation
- Zero-debt, cash-rich
- High ROCE business
- Global demand for soda ash remains stable
❌ What’s Sus:
- Falling revenue trend
- Low promoter holding
- No expansion into specialty or higher-margin segments
📉 Fair Value Range: ₹650–₹780
📈 CMP = ₹601 → discounted entry point
⚖️ Call it the Parle-G of the chemical world — not fancy, but profitable, and ignored.
✍️ Written by Prashant | 📅 26 June 2025
Tags: GHCL, soda ash, commodity chemicals, cheap chemical stocks, dividend yield, promoter holding alert, eduinvesting, undervalued cyclical, chemical multibagger, Gujarat-based manufacturers
