Motilal Oswal's research report on Alkyl Amines
AACL’s 4QFY24 revenue declined 14% YoY to INR3.6b, with agrochemicals seeing destocking and pharma witnessing demand stabilization. Sales volumes increased from the pharma sector. Gross margin expanded 270bp YoY to 49.2%, while EBITDAM expanded 50bp to 19.3% in 4Q. PAT declined 21% YoY to INR385m (our est. INR314m) The management noted that 2HFY24 was weaker than 1HFY24, with average utilization of 55% across plants in 2H. Volumes were subdued mainly due to Acetonitrile (ACN) and Mono Isopropyl amine. However, product prices were stable in 4Q. Raw material prices also declined, with sequential margin gains. A new Ethylamines plant was commissioned in FY24, which saw utilization of 60% in 2H. AACL has a larger market share than competition, and with steady growth in demand (5-7% every year) and improved margin, the management is confident to maintain its market share despite capacity expansion by competition.
Outlook
We reiterate our Neutral rating on AACL with a TP of INR2,010, based on 35x FY26E EPS.
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