🧪 At a glance
Once the toast of the chemicals rally, Sadhana Nitrochem is now 77% below its 52-week high, trading at ₹16.6. Despite EBITDA margins nearing 30% in recent quarters and profits back in green, the stock’s been wrecked — thanks to pledge drama, ballooning debtors, and a cash cycle that looks like an Olympic marathon. Is there hope left in this mini molecule?
🏭 About the Company
Sadhana Nitro Chem Ltd (SNCL), incorporated in 1973, is a legacy player in chemical intermediates, heavy organics, and performance chemicals. It also… surprisingly lists wireless network equipment as part of its business. 🧐
What started as a solid niche chemical exporter turned into a saga of:
- Wild stock runs
- Rights issues
- Balance sheet bloat
- Promoter pledges
👨🔬 Key Metrics (FY21–FY25)
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 103 | 132 | 143 | 190 | 166 |
| Operating Profit (₹ Cr) | 23 | 15 | 21 | 41 | 42 |
| OPM % | 23% | 11% | 15% | 22% | 26% |
| Net Profit (₹ Cr) | 16 | 6 | 3 | 4 | 8 |
| ROCE | 12% | 6% | 5% | 7% | 6% |
| EPS (₹) | 0.50 | 0.20 | 0.10 | 0.12 | 0.23 |
🧨 Revenue growth has stalled, but margin expansion saved face.
🔬 Recent Quarterly Highlights (Q4 FY25)
| Metric | Value |
|---|---|
| Revenue | ₹49.47 Cr |
| Operating Profit | ₹13.23 Cr |
| OPM | 26.74% |
| Net Profit | ₹4.10 Cr |
| EPS | ₹0.12 |
Margins are excellent. But let’s not forget: This is a ₹544 Cr market cap company with EPS of ₹0.12 per quarter. That’s ₹0.48 per year, giving a P/E of 34x on that run rate.
🧮 Fair Value Estimate (EduInvesting Range)
| Parameter | Conservative | Optimistic |
|---|---|---|
| EPS (FY26e) | ₹0.70 | ₹1.00 |
| Target P/E | 15x | 20x |
| Fair Value Range | ₹10 – ₹20 |
💡 CMP ₹16.6 is fair only if this margin story sustains — and dilution stops.
⚠️ Major Red Flags
- Promoter Pledge:
52.7% of promoter holding is pledged.
➤ That’s like taking a loan against your house to throw a party hoping someone else will pay. - Ballooning Debtors:
Debtor days? A record-breaking 270 days!
➤ Are customers meditating before paying invoices? - Cash Conversion Cycle:
Stretched to 776 days — that’s over 2 years to complete a working capital loop.
➤ Basically, this is the Himalayan trek of cash flows. - Rights Issue Hangover:
Raised ₹49.91 Cr in 2024 — diluted equity from ₹25 Cr to ₹33 Cr.
➤ Margins up, but EPS growth is muted. - Stock Crash:
From ₹74 to ₹16.6 — down 77% in just over a year.
➤ Retail investors still stuck at the top.
🧬 EduInvesting Take
Sadhana Nitrochem is like that smart chemistry student who aces lab work but forgets to submit homework.
- Margins? Great.
- Profit? Back in green.
- EPS? Recovering.
- Balance sheet? Still radioactive.
And while the company pays 90%+ of its profits as dividend, the ROE is just 2.98%. So basically, they’re giving you the returns because they don’t know what else to do with the cash.
Unless they clean up debtor days, reduce promoter pledges, and find stable cash cycles — this story stays high-risk, high-worry.
🔚 TL;DR
- ✅ EBITDA margins near 30%
- ✅ Net profit at ₹8 Cr in FY25
- ❌ Pledged promoter stake = 52.7%
- ❌ Debtor days = 270, CCC = 776
- ❌ Rights dilution + stalling revenue growth
- 🎯 Fair Value Range = ₹10 – ₹20
Verdict:
This isn’t a multibagger. It’s a rehab case. Unless management detoxes its financials, this stock will keep triggering margin calls and heartbreaks.
Author: Prashant Marathe
Date: 12 June 2025
Tags: Sadhana Nitrochem, chemical stocks, microcap stocks, pledge risk, debtor days, rights issue, turnaround smallcaps, SNCL analysis
