Buy Balaji Amines; target of Rs 55: Sunidhi Securities

Sunidhi Securities is bullish on Balaji Amines and has recommended buy rating on the stock with a target of Rs 55 in its May 8, 2012 research report.

“Incorporated in 1988, Balaji Amines (BAL) is the leading manufacturers of Aliphatic Amines in India. It caters to the growing requirements of value based specialty chemicals. BAL commenced manufacture of Methyl Amines in 1989 and subsequently added facilities of Ethyl Amines and other derivatives of Methyl Amines and Ethyl Amines. BALRss three state-of-the-art manufacturing plants are located at Solapur, Osmanbad in Maharashtra and Hyderabad in Andhra Pradesh. BAL’s maiden public issue was in 1996 priced at Rs40 per share of Rs10 FV. BAL is the first Indian company that has set up dedicated plants for the manufacture of specialty chemicals like N-Methyl 2 Pyrrolidone (NMP), Morpholine, 2 Pyrrolidone (2-P), Gamma Butyrolactone (GBL), Poly Vinyl Pyrrolidone (PVPK 30), N-Ethyl-2-Pyrrolidone (NEP), MMAE, DEAE, DMU and DMAE, which are widely accepted by clients the world over.”

“During FY12, sales advanced by 29.6% to Rs449.5 crore and net profit by 34.2% to Rs35.7 crore. OP and NP margin stood at 18.8% and 7.9% against 18.7% and 7.7% respectively in the corresponding period last year. EPS for FY12 stood at Rs11.0.The DER as at FY12 stood at 1.4:1 whereas the value of the net block stood at Rs220 crore Vs Rs172 crore in FY11. During Q4FY12, sales rose 35.7% to Rs118.7 crore and net profit by 317.5% to Rs7.1 crore. (YoY). OPM and NPM stood at 16.1% and 6.0% compared to 17.0% and 1.9% respectively in Q4FY11. EPS for Q4FY12 stands at Rs2.2.”

“BAL’s plants have been developed indigenously and continually revamped over the last two decades to maximize productivity levels with minimum capital outflow and optimal utilization of utilities and raw materials. With its unrelenting in-house R&D endeavor, the company has developed and launched several new products over the years, on par with the world’s best in quality and at comparable costs. Over the last decade, India has emerged as one of the world leaders in the discovery, development and manufacture of pharmaceuticals, chemicals and specialty products."

"BAL is among the frontrunners in this impressive growth story, providing high-quality inputs to a host of well-known global brands. Through a series of sustained and systematic process refinements in its indigenous facilities, BAL has been consistently adding capacities to meet the ever-growing demand for its world-class products, from both the domestic and overseas markets. Continuing to place a high premium on excellence in production, BAL is expanding by setting up a new pilot plant for development of new processes. In view of this, BAL has applied for 100 acres of land to MIDC. At the CMP of Rs39, the share is trading at a P/E of 2.6x on FY13E and 2.1x on FY14E. We recommend BUY with a target price of Rs55 in the medium term,” says Sunidhi Securities research report.

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