Hold BASF India; target of Rs 1185: Emkay Global Financial

Emkay Global Financial's report on BASF India

BASF India’s Q4FY20 revenues came in line with estimates (up 40.3% yoy), aided by topline growth in Agriculture, Materials and Industrial Solutions segments. The Chemicals segment recorded significant growth, due to change in the revenue recognition model. EBITDA margins were ahead of estimates (4.1% vs. Emkay est. of 2.5%), primarily due to lower employee costs and other expenses. This was partially offset by higher-finished goods purchase. EBIT margins overall improved to 1.8% vs. -1.6% in Q4FY19, aided by margin expansion in most segments, except Chemicals. This was offset by higher depreciation. Adj. PAT (incomparable yoy) was at Rs404mn, benefitting from tax credits and lower interest costs. The high-quality specialty product portfolio with solid brand image offers resilience in the current environment.

Outlook

We estimate revenue to grow at a 10% CAGR (FY21-23E). We introduce our FY23 estimates and roll forward our valuations to arrive at the TP of Rs1,185 (earlier Rs1,055). We maintain Hold rating, and EW in our EAP.

BASF India 26052020