CRISIL maintains valuation grade of 5/5 to Diamines

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CRISIL maintains valuation grade of 5/5 to Diamines

CRISIL Research has come out with its report on Diamines and Chemicals. The research firm has maintained the fundamental grade of 3/5 to the company in its February 2, 2012 report.

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CRISIL Research has come out with its report on Diamines and Chemicals . The research firm has maintained the fundamental grade of 3/5 to the company in its February 2, 2012 report.

Diamines and Chemicals Ltd's (Diamines') Q3FY12 results were below CRISIL Research's expectations. Revenue of Rs 133 mn declined 39% y-o-y as demand for ethyleneamines and piperazine continues to remain soft due to lower off take in European markets. EBITDA margin has declined to 10.5% from 25.1% y-o-y. We believe that lowered production of ethyleneamines in the wake of demand softness and lower piperazine prices have impacted EBITDA margin. In addition, high interest costs have further eroded the company's bottom-line profitability to Rs 0.06 mn. We may revise our projections and overall view on the company post our discussion with the management. Our current fundamental grade is 3/5.

Q3FY12 result analysis
• Revenue declined 39% y-o-y (21% decline q-o-q) to Rs 133 mn from Rs 219 mn in Q3FY11.The decline was largely due to weak demand from the European markets in the current macro environment. Also, we believe that the company has lowered its ethyleneamines production due to reduced demand.

• EBITDA margin at 10.5% were lower than our estimates and below 25.1% reported in Q3FY11. We believe that lower operating leverage from lower sales and lower piperazine prices primarily led to the margin erosion. EBITDA declined 75% y-o-y to Rs 14 mn.

• In conjunction with contracted EBITDA margins, higher interest cost further eroded the company's bottom-line profitability to Rs 0.06 mn.

Valuation: Current market price has strong upside
We continue to use the discounted cash flow method to value Diamines at Rs 78. Based on the current market price, the valuation grade is 5/5; however, we may revise it post our discussion with the management.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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