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BALAJI

AMINES LTD.

INDUSTRY CMP Recommend Add on

dips to Sequential

targets Time

horizon

DATE 30thJuly 2018

Commodity

Chemicals Rs558

Buy at CMP

and add on

declines

Rs500-506 Rs.629- 680 3-4

Quarters

‘Mega Project’ plans to drive next leg of growth Niche products & expansion to boost volume growth

Clampdown in China on chemical production Strong clientele to contribute growth

Investors may sell 60-65% of their holdings on first target being achieved and later keep a stoploss of first target for the balance holdings, in case the second target takes time to be achieved.

Investors may also maintain Rs.470 as level below which investment position needs to be reviewed, including the possibility to exit

Rs. 470

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HDFC Scrip Code BALAMIEQNR

BSE Code 530999

NSE Code BALAMINES

Bloomberg BLA IN

CMP (27-July-18) Rs 558

Equity Capital (Rs Cr) 6.5

Face Value (Rs) 2.0

Eq- Share O/S( Cr) 3.24

Market Cap(Rs Cr) 1804.7

Book Value FY18 (Rs) 144.2

Avg.52 Wk Volume 79698

52 Week High 781.0

52 Week Low 271.1

Shareholding Pattern % (30-June-18)

Promoters 54.6

Institutions 3.2

Non Institutions 42.2

Total 100.0

FUNDAMENTAL ANALYST

Abdul Karim Abdul.karim@hdfcsec.com

Company profile Balaji Amines Ltd (BAL), a KPR Group company, is world’s largest producer of DMA-HCL and India’s largest manufacturer of Aliphatic Amines. The company has the expertise to manufacture value-based specialty chemicals. Broadly, the company has specialised in the manufacture of Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products. Its business is broadly classified into three segments - Amines, Specialty Chemicals and Others (Derivatives). Amines & Speciality Chemicals have been the company’s main products. Others include facilities for the manufacture of derivatives, which are downstream products for various Pharma /Pesticide industries, apart from user-specific requirements. BAL is also engaged in the hospitality business, and owns a 5-star hotel at Solapur in Maharashtra.

Investment rationale •Clampdown in China on the production of chemicals has created tailwinds for chemical manufacturers in India, including BAL. •Expected imposition of anti-dumping duty could boost the company’s revenue and profitability growth, going forward. •Investment in the Specialty Chemicals business and ‘Mega Project’ plans to drive next leg of volume growth. •Strong demand-led volume growth and increasing utilisation level could improve margins. •Niche products to insulate BAL from downturns.

Concerns •Exchange rate volatility, quality/regulatory risks. •Largely depends on the pharma and agro-chemical sectors.

•Could face a dip in revenue and margins if manufacturing in China resume. •Past diversification into unrelated businesses. •Impact of fluctuations in raw material prices.

View and valuation BAL is engaged in manufacturing chemicals that are mainly used in the pharma/agrochem industries. Demand growth in these companies is steady. There are very few surprises in terms of volume growth. If at all this is adversely affected, only the margins would fluctuate in a narrow band. Capacity expansion and venturing into derivative products are factors that will provide visibility for growth in revenues and profits. The company’s hotel business, which was running in losses so far has turned around and could contribute in a minor way to the company’s overall profitability. Also, the efficient usage of plants, the product mix, and an increase in the value chain and plant efficiencies could energise the company’s earnings performance going ahead. Growth in FY19E and FY20E will be driven by commissioning of Acetonitrile plant (awaiting NOC from Wildlife authorities) and higher utilization of DMF (post imposition of anti-dumping duty) & DMAC plant (anti-dumping duty in place).

Traditionally, BAL has got lower valuations as compared to its peers, owing to past unrelated diversification and lower value-added manufacturing. With new ventures and expansions, along with the decision to exit the lamps and capsules business, the difference in valuation could narrow, especially given the visibility in growth in the top line and bottom-line. We feel investors could buy the stock at the CMP, and add on dips to the Rs 500-506 band (11.2x FY20E EPS) for sequential targets of Rs 629 (14x FY20E EPS) and Rs 680 (16x FY20E EPS). At a CMP of Rs 558, the stock trades at 12.4x FY20E EPS.

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Financial Summary

Particulars (Rscr) Standalone Consolidated

Q1FY19 Q1FY18 YoY-% Q4FY18 QoQ-% FY17 FY18E FY19E FY20E

Net Sales 260.2 200.1 30.0% 256.9 1.3% 730.6 877.0 1,015.1 1,169

EBITDA 58.7 40.6 44.6% 46.9 25.2% 152.7 189.5 223.8 252

APAT 33.8 22.8 48.6% 33.2 2.0% 82.4 113.1 130.4 145

Diluted EPS (Rs) 10.4 7.0 48.6% 10.2 2.0% 25.4 34.9 40.2 44.9

P/E (x) 22.0 16.0 13.9 12.4

EV / EBITDA (x) 11.8 9.7 8.2 7.3

RoE (%) 22.7% 24.2% 22.3% 20.3%

Key Highlights

Balaji Amines Ltd (BAL), a KPR Group company, is the world’s largest producer of DMA-HCL, and India’s largest manufacturer of Aliphatic Amines. The company has the expertise to cater to value-based specialty chemicals.

Broadly, the company has specialised in

the manufacture of Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products. Amines & Speciality Chemicals have been the company’s main products. Others include facilities for the manufacture of derivatives, which are downstream products for various Pharma /Pesticide industries, apart from user-specific requirements.

BAL has traditionally got lower valuations as compared to its peers due to past unrelated diversification and lower value-added manufacturing. With new ventures and expansions, and the decision to exit the lamps and capsules business, the difference in valuations could narrow, especially given the visibility in growth in the topline and bottom-line.

Company profile

Balaji Amines Ltd (BAL), a KPR Group company, is world’s largest producer of DMA-HCL and India’s largest manufacturer of Aliphatic Amines. The company has the expertise to manufacture value-based specialty chemicals. Broadly, the company has specialised in the manufacture of Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products. Its business is broadly classified into three segments - Amines, Specialty Chemicals and Others (Derivatives). Amines & Speciality Chemicals have been the company’s main products. Others include facilities for the manufacture of derivatives, which are downstream products for various Pharma /Pesticide industries, apart from user-specific requirements. BAL is also engaged in the hospitality business, and owns a 5-star hotel at Solapur in Maharashtra. The company’s three manufacturing facilities are located in Solapur, Maharashtra and Hyderabad, Telangana. BAL is the first Indian company that has set up a dedicated plant for the manufacturing of specialty chemicals like N-Methyl Pyrolidine (NMP), 2-Pyrolidine, N-Ethyl – Pyrolidine, Di-Methyl Acetamide (DMAC), Di-Methyl Amine Hydrochloride (DMAHCC), Tri-Methyl Amine Hydrochloride (TMAHCL), and Di-Ethyl Amine Hydrocholoride (DEAHCL) and Tri Ethyl Amine Hydrocholoride (TEAHCL). These are widely accepted by its clients across geographies. A large part of the company’s products are being exported to major customers worldwide, and the company has become one of the leaders in the Specialty Chemicals arena, among the International Specialty Chemical players.

Q1FY19 Result review

BAL reported better-than-expectation numbers, reported 30% (YoY) revenue growth to Rs 260.2cr in Q1FY19 led by healthy volume growth of 18.8%. Export sales grew by 91.4% (YoY) to Rs 55.8cr contributing 21.4% of sales. Gross margins dipped by 410bps (YoY) due to higher Methanol prices (up by 66.9% (YoY) to Rs 26.5.kg). Its EBITDA margin ramped up by 230bps (YoY) to 22.6% because of lower other expenses. PAT margin was up by 160bps (YoY) to 13% in Q1FY19.

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Investment rationale

Clampdown in China on chemical production has created tailwinds for chemical manufacturers in India, including BAL China has witnessed an immense reduction in the production of chemicals in the last 18-24 months. This comes on the back of the crackdown initiated by the Chinese Government on polluting Chinese plants.

In addition to this, the Indian chemical industry faces structural tailwinds owing to China’s pollution problem. Effluent treatment mechanism has become a pre-requisite to carry on business and receive export incentives. This has substantially affected the cost structure of dye and dye-intermediate producing firms in China, and has therefore nullified the cost-efficiency advantage of these Chinese firms. These changes in the global dye intermediates industry has had a significant impact on the companies in India that are engaged in the same business.

This shift in prices on account of global changes has led to an increase in the company’s turnover over the last 7 quarters. There has been a substantial hike in the gross margins of the company, and the case has been the same with other major players in India. The expansion in margins has been more in case of KIL owing to its integrated operations. Price levels are expected to stay elevated, with similar production levels being same from Chinese and global MNCs, derisking their sourcing by shifting it to Indian markets. Expected imposition of anti-dumping duty could boost the company’s revenue and profitability growth going forward

Anti-dumping duty on DMF (Dimethyl formamide) could be imposed in the next few months(hearings complete in Jun-18), and will help in increasing the utilization level from the current 30-35% to 60-65% over time. This could lead to the expansion of overall margins owing to operating leverage.

Anti-dumping duty on DMAC has been imposed in Mar-18. We expect incremental volumes of ~2,000 MTPA coming from DMAC in FY19.

Anti-dumping duty on Mono Isopropyl Amine too has been imposed, which is a likely product for BAL in the planned green-field expansion.

Investment in the specialty chemicals business and ‘Mega Project’ plans to drive next leg of growth

BAL’s Rs 66crore investment in its 55% subsidiary Balaji Specialty Chemicals is expected to be operational from H2FY19. The Rs 180crore project, with 56% debt funding, is progressing swiftly, and has already procured environmental clearance for its key products Ethylene Di Amine (EDA) and its co-products Diethylenetriamine (DETA), AEP, Piperazine Anhydrous (PIP-A). Currently, these products are largely imported in India, giving BAL a good import substitution case with a quick ramp-up ability. At its full capacity, this plant can generate sales of Rs 400cr to Rs 450 cr. In FY19, this unit can generate sales of Rs50-75 crore.

BAL has also procured the status of ‘Mega Project’ for its expansion project plan in the 90-acre land allotted to it in MIDC, Chincholi (Dist Solapur). This status entitles the company to various incentives, subject to the compliance of Package Scheme Incentives (PSI) 2013. BAL intends to manufacture MIPA (Mono Isopropanolamine), IPA (Isopropyl Alcohol), Ethylamine, and Methylamine in the first phase of this project, while MIBK (Methyl Isobutyl Ketone), DPA (Diphenylamin), and other products will be tackled in the second phase. BAL announced an investment of Rs 250cr -300cr (opportunity size of Rs 450cr) in Phase 1, and this project will be executed by the company in two phases with a nearly Rs 200cr investment outlay in each phase, funded by a combination of debt and equity. Commercialisation of each phase is expected to be operational in FY20E and FY21E respectively.

Strong demand-led volume growth and increasing utilisation level could impact to maintain margins:

BAL expanded its capacity for the manufacture of methylamines and other specialty chemicals between FY10-FY14, riding on the strong demand potential from its key end-user industries — pharmaceuticals and agrochemicals.

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With limited competition (duopoly) and the ability to substitute imports via competitive pricing, BAL is rapidly increasing utilisation levels and gaining operating efficiencies. While its methylamines and derivatives capacity is operating at blended 85%+ utilisation levels, its remaining portfolio is operating at near 65-70% levels.

Methanol, being a key raw material for methylamines, a substantial portion of revenue is from price-linked contracts that allow BAL to pass on the methanol price volatility without significantly impacting its gross margins, except for a lead lag period of 2-3 months.

Niche products to boost volume growth

The expansion of Morpholine (from 3,000 MTPA to 10,000 MTPA in FY18), DMA HCL (de-bottlenecked capacity from 24,000 MTPA to 31,500 MTPA) and Acetonitrile capacity was carried out with minimal capex (~Rs 65crore in FY18-FY19E). This could aid volume growth of 10% to 15% (YoY)in these products. The company has set up a new facility for Acetonitrile, and has received environmental clearance for the setting up of a 17,000 MTPA plant (expected in 1QFY19E).

An entry into Ethylene Diamine, Piperazine and Diethylenetriamine through an investment in Balaji Specialty Chemicals could boost volume-led growth via new product streams.

Strong clientele to contribute to growth About 50-60% of BAL’s sales come from the pharma and agrochemicals sectors, while the rest is split amongst a number of other end-users like oil refineries, water chemicals, rubber chemicals etc. BAL has a strong presence in the domestic market, with major clients from the pharma sector, including the likes of Aurobindo, Aventis, Clariant, Dr Reddy’s, Glaxo, Merck, Ranbaxy, Sun Pharma, Wyeth, Wockhardt, etc. Other clients include rubber chemical companies in Kerala, Gujarat and North India, and water companies like Ion Exchange and Thermax, and refineries like IOCL, HPCL etc. Lastly, agro chemical companies like Rallis, Meghmani and Gherda Chemicals are also part of its client list.

Concerns

Exchange rate volatility BAL derives ~ 22% of sales from exports to several countries such as UK, USA, Canada, Latin America, Germany, Italy, Middle East, South Africa, France, Brazil, Mexico etc. The company sells directly to its customers in India, while in the case of exports it goes through distributors’ channel. Therefore, adverse currency movement could impact its revenues and profitability. The prices of raw materials are entirely based on US$ rates, even if they are manufactured in India.

Quality/Regulatory risks Being a part of the chemical industry, BAL is acclaimed for its quality-consciousness. It enjoys ‘GMP’ (for facility and practices) and WHO GMP (for products) certifications for some of its products. BAL follows the norms of USFDA, DMF (Drug Master File), and various audit agencies of countries, where the product is going for export. Any regulatory delay/action could be a hurdle in the way of BAL’s earnings and profitability.

Largely depends on the pharma and agrochemical sector Almost 50% -60%of BAL’s sales come from the pharma and agrochemical sector, while the rest depends on other end users like oil refineries, water chemicals, rubber chemicals etc. Therefore, sector-specific slowdowns and concerns could impact the company’s revenue.

Promoter’s involvement in BAL’s subsidiary - Balaji Speciality The promoters of BAL hold 45% stake in BAL’s subsidiary Balaji Speciality Chemicals, when BAL could have made this a 100% subsidiary. Land in the name of promoters (which cannot be transferred) is the justification given for the promoter’s stake in the subsidiary.

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Loss in revenues and margins if Chinese operations resume in full swing A lot of Chinese majors were asked to shut down due to environmental issues. The requirement of higher emission norms confirmation makes the cost structure unviable for these Chinese firms. However, there still remains a fear in the minds of Indian players of a dip in chemical prices, with a resumption in production of Chinese plants which have been shut down.

Diversification into unrelated businesses Promoters have entered the Hotel, CFL/LED lamps, and capsules businesses in BAL (and hinted at entering the engineering business) in the past, which has pulled down financial ratios and impacted valuations. Some of these businesses have been closed.

Impact of raw material fluctuations Apart from ammonia and ethanol, methanol is a key raw material for BAL. Prices of these products are linked directionally to crude oil prices. Although fluctuations in these are largely passed on to customers, there is a lag period involved during which the margins of BAL are impacted. Raw Material Prices Index

(Source: Reuters, HDFC sec)

Delay in commissioning projects due to environmental NOC and other reasons could postpone growth in revenues/profits.

View and valuation We had issued a Stock Note (Click here) on Dec 28, 2015 (when its CMP was Rs 163) with a recommendation to “Buy at CMP and add on declines to price band of Rs128-136” for sequential targets of Rs 192 and Rs 216 over the next 2-3 quarters. The stock achieved its first target on April 05, 2016 and second target on May 02, 2016. It later rose to a high of Rs.781 on Jan 11, 2018 and fell to Rs.470 on July 17, 2018. BAL is engaged in manufacturing chemicals that are mainly used in the pharma/agrochem industries. Demand growth in these companies is steady. There are very few surprises in terms of volume growth. If at all this is adversely affected, only the margins would fluctuate in a narrow band. Capacity expansion and venturing into derivative products are factors that will provide visibility for growth in revenues and profits. The company’s hotel business, which was running in losses so far has turned around and could contribute in a minor way to the company’s overall profitability. Also, the efficient usage of plants, the product mix, and an increase in the value chain and plant efficiencies could energise the company’s earnings performance going ahead. Growth in FY19E and FY20E will be driven by commissioning of Acetonitrile plant (awaiting NOC from Wildlife authorities) and higher utilization of DMF (post imposition of anti-dumping duty) & DMAC plant (anti-dumping duty in place).

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Traditionally, BAL has got lower valuations as compared to its peers, owing to past unrelated diversification and lower value-added manufacturing. With new ventures and expansions, along with the decision to exit the lamps and capsules business, the difference in valuation could narrow, especially given the visibility in growth in the top line and bottom-line. We feel investors could buy the stock at the CMP, and add on dips to the Rs 500-506 band (11.2x FY20E EPS) for sequential targets of Rs 629 (14x FY20E EPS) and Rs 680 (16x FY20E EPS). At a CMP of Rs 558, the stock trades at 12.4x FY20E EPS.

Particulars, Rs in cr Q1FY19 Q1FY18 YoY-% Q4FY18 QoQ-%

Net Sales 260.2 200.1 30.0% 256.9 1.3%

Raw Material Consumed 150.1 91.5 64.2% 153.9 -2.4%

Stock Adjustment -8.9 8.9 -199.4% -7.5 18.0%

Employee Expenses 12.6 9.3 35.7% 11.1 13.1%

Other Expenses 47.7 49.8 -4.3% 52.6 -9.3%

Total Expenses 201.5 159.5 26.3% 210.0 -4.1%

EBITDA 58.7 40.6 44.6% 46.9 25.2%

Depreciation 4.7 4.4 7.2% 6.2 -23.6%

EBIT 54.0 36.2 49.1% 40.7 32.6%

Other Income 1.0 0.9 3.4% 1.3 -22.5%

Interest 3.2 2.7 17.7% 2.6 24.6%

EBT 51.7 34.4 50.4% 39.4 31.4%

Tax 17.9 11.6 53.8% 6.2 188.6%

PAT 33.8 22.8 48.6% 33.2 2.0%

Adj. Profit After Extra-ord item 33.8 22.8 48.6% 33.2 2.0%

EPS (Rs.) 10.4 7.0 48.6% 10.2 2.0%

Particulars, Rs in cr Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19

Revenue from Operations 166.4 177.1 200.1 201.2 219.1 256.8 260.3

Amines Division 162.1 172.9 195.1 196.8 214.0 251.0 255.4

Hotel Division 4.3 4.3 5.0 4.4 5.0 4.9 4.9

CFL Lamps and Capsules 0.8

PBIT 32.9 20.0 37.1 48.4 47.4 44.1 54.9

Amines Division 33.1 34.4 37.2 48.7 47.1 44.3 55.2

Hotel Division -0.1 -14.4 -0.1 -0.3 0.2 -0.2 0.1

CFL Lamps and Capsules 0.0 -0.4

Quarterly Financials-Standalone

Segment-wise Performance

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Year End March (Rs Cr) FY16 FY17 FY18 FY19E FY20E

Net Sales 643.1 730.6 877.0 1,015.1 1,169.2

Materials Cost 330.5 347.3 461.0 528.9 610.3

Change in Inventory 25.7 -5.0 3.1 2.0 3.5

Employee Cost 32.9 24.5 45.1 49.2 54.4

Other Expenditure 127.3 211.1 178.4 211.1 249.0

Total Expenditure 516.4 577.9 687.5 791.2 917.2

EBITDA 126.7 152.7 189.5 223.8 252.0

Depreciation 19.4 19.7 19.3 27.3 31.4

EBIT 107.3 132.9 170.2 196.6 220.6

Other Income 2.8 3.1 4.1 5.1 6.4

Interest 22.2 12.9 9.0 9.9 12.4

EBT 88.0 123.1 165.2 191.7 214.6

Tax 30.3 43.3 52.7 61.4 69.2

Reported Profit (before minority interest) 57.6 79.8 112.5 130.4 145.4

Exceptional Items - -2.6 -0.6 - -

Adjusted Profit 57.6 82.4 113.1 130.4 145.4

EPS 17.8 25.4 34.9 40.2 44.9

Year End March (Rs Cr) FY16 FY17 FY18 FY19E FY20E

EBT 110.1 138.5 174.2 201.6 227.0

Depreciation and Amortization 19.4 19.7 19.3 27.3 31.4

Interest /Dividend paid - - - - -

Other Adjustment -2.8 -5.0 -3.4 -33.1 -30.3

(Inc)/Dec in working Capital -28.8 -74.8 -64.5 -51.9 -64.6

Tax Paid -13.1 -26.3 -52.7 -61.4 -69.2

CF from Operating Activities 84.8 52.2 72.9 82.6 94.3

Capital expenditure -32.2 -13.6 -89.6 -42.7 -93.6

Proceeds from sale of fixed assets 0.1 0.4 0.4 0.4 0.5

(Purchase)/Sale of Investment - - - -30.0 -3.0

Others 2.8 5.0 4.1 5.1 6.4

CF from Investing Activities -29.3 -8.2 -85.2 -67.3 -89.7

Inc/(Dec) in Share capital - - - - -

Inc/(Dec) in Debt -27.9 -29.6 59.1 10.0 25.0

Dividend and Interest Paid -26.0 -19.4 -19.1 -21.6 -26.0

CF from Financing Activities -54.0 -49.0 40.0 -11.6 -1.0

Net Cash Flow 1.6 -5.1 27.7 3.7 3.6

Opening Balance 7.0 8.6 3.5 31.2 35.0

Closing Balance 8.6 3.5 31.2 35.0 38.5

Annual Financial Statement- Consol

Cash Flow

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Year End March (Rs Cr) FY16 FY17 FY18 FY19E FY20E

I. EQUITY AND LIABILITIES

Share Capital 6.5 6.5 6.5 6.5 6.5

Reserves & Surplus 106.0 138.6 164.9 194.6 221.4

Shareholder Fund 112.5 145.1 171.4 201.1 227.9

Minority Interest in subsidiaries - - - - 2.0

Long Term borrowings 64.1 86.1 103.7 86.0 74.8

Deferred Tax Liabilities (Net) 33.7 36.6 39.8 42.4 45.1

Other Long Term Liabilities 0.6 3.7 5.9 5.0 16.4

Non - current liabilities 98.5 126.4 149.4 133.4 136.3

Short Term Borrowings 83.6 111.1 105.6 139.5 148.5

Trade Payables 33.5 34.7 35.5 87.0 47.6

Other Current Liabilities 21.3 25.8 36.3 41.5 42.4

Short Term Provisions 16.0 22.6 21.1 17.7 18.0

Current Liabilities 154.4 194.1 198.6 285.7 256.4

Total Equity and Liabilities 365.3 465.7 519.3 620.2 622.6

II. ASSETS

Fixed Assets 171.9 220.7 297.3 333.5 344.4

Net Block (Tangible Assets) 160.1 196.0 234.4 325.4 341.1

Capital Work-in-Progress 11.8 24.7 62.9 8.1 3.3

Non Current Investments 4.0 4.0 0.0 0.0 0.0

Other Non-Current Assets 0.7 1.0 2.1 2.3 2.3

Non-Current Assets 176.6 225.7 299.4 335.8 346.8

Current Investments 3.8 3.8 19.9 19.9 -

Inventories 70.6 107.4 56.8 90.6 112.4

Trade Receivables 73.7 82.1 103.7 131.5 119.4

Cash & Cash Equivalents 9.0 4.5 2.7 9.7 7.0

Short Term Loans & Advances and other current assets 31.4 42.1 36.9 32.6 37.1

Current Assets 188.7 239.9 220.0 284.4 275.8

Total Assets 365.3 465.7 519.3 620.2 622.6 Source: Company, HDFC sec)

Consolidated Balance Sheet

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Year End March (Rs Cr) FY16 FY17 FY18 FY19E FY20E

Market Capitalization-cr 1,807.9 1,807.9 1,807.9 1,807.9 1,807.9

Entreprise Value-cr 1,897.9 1,808.6 1,837.0 1,829.7 1,839.7

PER SHARE DATA

EPS 17.8 25.4 34.9 40.2 44.9

Cash EPS (PAT + Depreciation) 23.8 31.5 40.9 48.7 54.6

Book Value Per Share(Rs.) 86.5 111.9 144.2 180.9 221.5

VALUATION

PE(x) 31.4 22.0 16.0 13.9 12.4

P/BV (x) 6.5 5.0 3.9 3.1 2.5

Mcap/Sales(x) 2.8 2.5 2.1 1.8 1.5

EV/EBITDA 15.0 11.8 9.7 8.2 7.3

MARGINS

EBITDAM (%) 19.7% 20.9% 21.6% 22.1% 21.6%

EBITM (%) 16.7% 18.2% 19.4% 19.4% 18.9%

PATM (%) 9.0% 11.3% 12.9% 12.8% 12.4%

RETURN RATIO

ROCE (%) 26% 31% 29% 27% 25%

RONW (%) 21% 23% 24% 22% 20%

Payout (%) 13% 10% 9% 9% 9%

CURRENT RATIO

Current Ratio 1.1 1.4 1.4 1.9 2.4

Quick Ratio 0.8 0.9 1.1 1.4 1.8

EFFICIENCY RATIO

Debt-Equity 0.5 0.2 0.3 0.3 0.2 (Source: Company, HDFC sec)

Company Mkt Cap, Cr EPS (Rs) P/E (x) RoE-%

FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

Balaji Amines 1,807.9 34.9 40.2 44.9 16.0 13.9 12.4 24.2% 22.3% 20.3%

Alkyl Amines 1,413.8 31.5 36.7 41.2 22.0 18.9 16.8 23.7% 23.0% 21.8%

Ratio

Peer Comparison

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(Source: Company, HDFC sec)

Daily Closing Price Chart

1 Year forward P/E chart

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Fundamental Research Analyst: Abdul Karim (abdul.karim@hdfcsec.com) HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email:hdfcsecretailresearch@hdfcsec.com. Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600

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