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HDFC Securities
Balaji Amines (Buy)
CMP: ₹157.50
Target: ₹192-216
Balaji Amines Ltd (BAL) a KPR group company is a leading manufacturer of aliphatic amines in India in terms of volume and value in its class. Broadly, the company has specialised in manufacturing methylamines, ethylamines, derivatives of specialty chemicals and natural product and its business is broadly classified into three segments — Amines, Specialty Chemicals and Derivatives. It has recently set up a hotel in Solapur.
Triggers: a) Dominant in methylamines and no major threat of competitive intensity; b) Strong clientele; c) Past expansion creates an opportunity for future; d) Backward integration offers scope for better capacity utilisation (vs peers) and higher value addition.
Risks: a) Largely dependent on pharma and pesticide sector; b) Volatility in currency movements; c) Quality/regulatory risks; d) Investment in hotel and subsidiary could be return dilutive in the near term.
Considering its strong brand equity, high entry barriers, highly innovative and R&D-based chemical business and sound management, BAL could report good growth in top and bottom line going forward. We feel investors could buy the stock at the CMP and add on dips to ₹128-136 band (8-8.5xFY17E EPS).
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