stocks to buy today: Upward investing: 4 stocks in near monopoly and higher margins
This approach focuses on companies with niche or near-monopoly products with high barriers to entry and higher margins. ETIG shortlisted Clean Science and Technology, Sudarshan Chemical Industries, Tatva Chintan Pharma Chem and Sona BLW Precision Forgings. They are leaders in niche products in India and abroad.
For example, Clean Science is the largest producer of hydroquinone monomethyl ether (MeHQ), an absorbent used in baby diapers and sanitary napkins. The company has a global market share of approximately 52%. He plans to increase capacity by almost 65% in 2-3 years. The company has developed a greener way to produce anisole through vapor phase technology, making it the only player in the world to manufacture anisole. Innovation has contributed to margin expansion and cost competitiveness.
Sudarshan Chemical, based in Pune, became the third largest pigment manufacturer in the world in 2011 among the top 20 players. Despite the commoditized nature of the pigments, the company customizes the final product for each customer, creating barriers to entry for new players and also requiring a long approval cycle from customers. It has undertaken a 750 crore investment to increase its capacity and is building one of the most efficient chemical complexes in India and the world with a strong focus on effluent treatment. This will help Sudarshan become one of the leading providers of world-class color solutions.
Investors can also consider Tatva Chintan, the only manufacturer of Structured Directing Agents (SDAs) for zeolites in India and the second largest in the world. Zeolite-based SDA is used as a catalytic converter to reduce NOx emissions in BS6 engines. The SDA segment contributes 40% of total revenue. Cutting-edge chemicals are a high barrier to entry. Additionally, the company manufactures electrolyte salt for supercapacitor batteries which is crucial for battery efficiency.
The fourth company on our radar is Sona BLW Precision Forgings. The company’s expertise in precision forging for gears has given it an edge in the electric vehicle (EV) segment as it can meet requirements such as high power density, better torque and light vehicles at lower prices. Although there is a high barrier to entry for EV equipment suppliers, Sona BLW’s ability to gain share is higher due to its technological prowess and lowest cost advantage. It has an installed capacity of 40 million gears per year and plans a capex of `1,000 crore in three years to increase capacity.