Neutral Alkyl Amines; target of Rs 2400: Motilal Oswal

Motilal Oswal's research report on Alkyl Amines

Alkyl Amines (AACL) reported in-line revenue in 4QFY23. Gross margin contracted to 46.4%. EBITDA was also in line at INR769m with EBITDAM at 18.7% (+80bp QoQ). Operating expenses were higher due to elevated coal prices even as the company was able to maintain its market share in FY23.  The pharma industry outlook appears positive after a couple of years of drag post-Covid due to de-stocking on account of inventory buildup during the pandemic. That being said, the management focus and long-term guidance of 10-15% volume growth remained intact. The average utilization of both the ACN plants was 60-65% in FY23 with current realizations being INR150/kg. In USD terms, it is one of the lowest values right now due to a glut in the market but the management expects the prices of ACN to rebound in FY24. Capacity expansion of Ethyl Amines in Kurkumbh (100tpd capacity) is on track and is expected to be commissioned by Jul’23. Capex envisaged for the same is INR4b. The company had also commissioned Di-Ethyl Ketone in Feb’23, the plant of which has now stabilized with other four products set to be commissioned in the next 24 months.

Outlook

The stock is trading at 32x FY25E EPS and 22x FY25E EV/EBITDA. We reiterate our Neutral rating on the stock, and value it at 30x FY25E EPS to arrive at our TP of INR2,400.