Black Rose Industries - A 10 Bagger in making - BUY

Black Rose Industries Ltd. ( CMP on 8-Sep-14  = 9.93/- ) was established in 1990 as Asia Fab Limited, a textile manufacturing company. Now, Black Rose consists of three main divisions – chemicals, acrylamide, and textiles. The chemical division is engaged in the import, distribution, and export of a wide range of specialty and performance chemicals. The acrylamide division operates India's first and only acrylamide manufacturing plant. The textile division manufactures fabrics and made-ups for industrial applications. The company also has a fully owned subsidiary in Japan, B.R. Chemicals Co., Ltd., Japan.

RECENT ATTRACTION – ACRYLAMIDE – A Possible rerating candidate due to this:

The company produce and supply acrylamide solution under the brand name BRILMIDE^® at South Asia’s first and only acrylamide plant set up using a bio-catalytic technology exclusively licensed from Mitsui Chemicals, Inc., of Japan. The 10,000MT plant is located in the industrial estatate of Jhagadia, Gujarat and runs on a DCS-operated continuous process. Since starting of commerical operations in September 2013, the company has been increasing it sales and production to meet the ever growing demand of users in India and overseas.

The major application of this product is applicable to the future energy source – shale gas. The acrylamide is used for polymers for shale gas extraction.

The details about future trends in shale gas extraction can be read here.

1. Shale gas - game changer

2. ONGC starts exploring shale gas

Acrylamide is mainly used in but not limited to the following:

Polymers for enhanced oil recovery,
Polymers for shale gas extraction,
Polymers for shale strengthening,
Polymers for flocculation in waste water,
Binders and retention aids in paper,
Water proofing chemicals,
Cement additives,
Coating and paint emulsions,
Textile sizing chemicals and binders,

Future Outlook

Going forward the company is expected to deliver better numbers as another 80 – 100 Cr turnover will be added to the top line from the Acrylamide division. The company also plans to increase the production of Acrylamide from the existing 10,000 MT to 40,000 MT in future. Investors with enough patience and very long outlook can start buy in SIP mode for future appreciation.

10+ Year Price Chart

Pros

1. Growth oriented field of business – related to shale gas extraction story.
2. Tiny market cap of 50 odd Crores
3. Promoters Holding 75 % Share and No pledge

Cons

1.       Recent run up in share price
2.      Debt/equity ratio of more than 1.

Rating

Business Outlook	*******	( 7 / 10 )
Scalability	******	( 6 / 10 )
Promoters Quality	*****	( 5 / 10 )
Valuation	*****	( 5 / 10 )
Overall	******	( 6 / 10 )

Buying Strategy

The share has run a lot in the near term. Corrections may be possible from these levels, Even though it gives value for the buyers at this level too.

Long term investors can start investing in this scrip between Rs. 10/- to Rs. 12/- . Any dip in the price gives scope for better accumulation.

I am giving a 10x bagger target for this share in next 5 years, with only a limited exposure of 2 % to 4 % (max) in portfolio.

Disclosure : I have vested interest in Black Rose Industries