Balaji Amines Ltd. share price target

Owing to muted earnings growth prospects, and declining return ratios (ROE: 16.1/15.1/13.5%, RoIC: 22.5/21.7/18.8% in FY20E/21E/22E), we prefer Alkyl Amines over Balaji in the Amines space. We maintain BUY on BAL, post its above expectation performance in Q2FY20, with a TP of Rs 488 (13x Sep-21E EPS). Strong volume traction in high margin Specialty chemicals and Amines Derivatives coupled with benign RMC, amplified its operating performance.

Dominant player in the Indian amines industry The Indian aliphatic amines industry is largely a duopoly with Balaji Amines (BAL) and Alkyl Amines Chemicals comprising more than 90% of the market. Yet, the product portfolio of these two companies within the industry is varied with each being dominant in specific chemicals. This has made the industry structure appear closer to being a monopoly for each of the players with the key competition being, only imports. BAL manufactures amines (methyl amines and ethyl amines) and their derivatives, speciality chemicals and pharma excipients. Overall, the company has a portfolio of over 25 products, which are supplied to domestic and foreign players (exports accounted for around 21% of the total sales in...

Balaji Amines Ltd's (BAL) Q1FY20 results were lower than our estimates as the company was impacted by a slowdown in key end-user industries and volatility in prices of raw material.

Post an underwhelming Q1 and tepid volume outlook, we cut our EPS estimate by 11.4/14.5% for FY20/21E. Given the (1) Muted earnings growth prospects, (2) Declining return ratios (ROE: 14.6/14.4/13.1%, RoIC: 21.8/21.8/19.1% in FY20E/21E/22E), we prefer Alkyl Amines over Balaji in the Amines space. BAL reported muted performance in Q1FY20 consequential to (1) Soft volume off-take by the agrochemical industry, (2) High raw material prices, predominantly Methanol. Hence, we cut our EPS estimates for FY20/21 and arrive at a TP of Rs 452/share based on 13x Sep-21E EPS.

Balaji Amines Ltd's (BAL) Q4FY19 results were mostly in-line with our estimates. Revenue for the quarter came in at INR 235 crore, which was 9% lower on an y-o-y basis and ~7% below our estimates.

Balaji Amines (BAL) posted lower than expected profitability this quarter primarily owing to significant rise and volatility in prices of its key raw material, methanol.

We maintain our Buy rating on Balaji Amines and value BLA at 17.0x Dec 21 EPS with a target price of Rs 793/share. Balaji Amines (BLA) reported its 3QFY19 performance below our estimates. Sales grew by 9.5% YoY to Rs 2.34bn while EBITDA/APAT declined by 15.8% and 4.4% YoY. Higher input costs (esp Methanol) up almost ~60% YoY dented margins.

Balaji Amines (BAL) delivered slowdown in Q2FY19 primarily owing to ~20% rise in prices of its key raw materials, ammonia and methanol.

We maintain our Buy rating on Balaji Amines and value BLA at 17.0x Sep 21 EPS with a revised target price of Rs 763/share. Balaji Amines (BLA) reported a muted 2QFY19 performance on account of higher input costs (Methanol prices up ~40% YoY) and aberrations in operations due to regional political movements and strikes at ports. Sales grew by 7.6% YoY to Rs 2.16bn while EBITDA/APAT declined by 13.1% and 6.0% YoY.

Balaji Amines (BAL) delivered 30% topline growth led by a 19% volume and 9% pricing growth.