Good Financials with a premium clientele

• Gandhar Oil Refinery has demonstrated robust financial performance over the past two years, exhibiting impressive growth in both its top line and bottom line. The company achieved a remarkable 40% Compound Annual Growth Rate (CAGR) in revenue and a solid 46% CAGR in net profit during this period. The Return on Equity (ROE) stands at an impressive 32%, aligning it with the best-performing peers in the industry.
• Specializing in manufacturing ingredients for consumer care products, Gandhar has established strong partnerships with leading companies such as Unilever, P&G, Marico, Emami, and Bajaj Consumer. The consistent growth reported by these clients, particularly in their consumer segments, underscores the sustained demand for Gandhar's specialty oils. Notably, the Personal Care and Lubricants business segments, contributing 84% of the total revenue, have experienced substantial growth in the past two years.
• However, a noteworthy concern has emerged as the company, which consistently reported positive cash flow from operations until March 2023, recorded a negative cash flow from operations in the June quarter. This unexpected shift in cash flow may raise concerns among investors.

Valuation

• The company is proposing a PE (Price-to-Earnings) ratio of 7.8x and a market cap-to-sales ratio of 0.4x. When compared to its peers, these valuation metrics appear quite attractive, presenting a potential opportunity for investors seeking capital appreciation. Therefore, we recommend subscribing to this IPO.