Motilal Oswal's research report on Alkyl Amines
Alkyl Amines (AACL)’s 2QFY24 revenue was lower than our expectation and declined 14% YoY, primarily due to increased Chinese dumping amid the company’s aggressive pricing in 2-3 products. Gross margin expanded to 45.7% in 2Q. EBITDA, at INR483m, was lower than our estimate due to higherthan-anticipated other expenses. This resulted in an EBITDAM of 13.7%. Management highlighted that demand from the domestic market is decent enough, although some pressure exists in the agrochemical and pharma sectors. Demand has been weaker in Europe and META (Middle East, Turkey, and Africa) regions than it has historically been. Some customers, though, are expecting demand to accelerate once the situation normalizes. Alcohol prices are expected to remain at elevated levels for the next year and AACL hasn’t been able to pass on the price increase completely to customers. That being said, AACL has maintained its market share in the domestic market, if not gained, even during the slowdown. The company, though, has been sacrificing margin in order to maintain its market share.
Outlook
Due to underperformance in 1H, we have cut our revenue/EBITDA/EPS estimates by 10%/15%/21% for FY24 and EBITDA/EPS estimates by 6%/8% for FY25. The stock is trading at ~39x FY25E EPS of INR55.3 and ~26x FY25E EV/EBITDA. We reiterate our Neutral rating on the stock, and value it at 35x FY25E EPS to arrive at our TP of INR1,935.
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