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CD Equisearch
Balaji
Amines (Buy)
Target: ₹1,104
CMP: ₹846
Scarcely tethered by the ongoing pandemic, Balaji Amines would continue with its capital expenditure program, having already spent ₹80 crore on the greenfield project by the end of the first quarter this fiscal, by commissioning the production of ethyl amines by the end of this fiscal and DMC next fiscal involving a total capital expenditure of some ₹150 crore.
BAL’s impetus to expand product portfolio and enter new products which could substitute imports, will yield not so tepid revenue from new products over the next couple of years; it is coming up with 9900 MT DMC capacity which is a solvent that can be used in paints etc. It should be operational by the end of the second quarter next fiscal and at current prices; it would generate peak revenues of close to ₹120-130 crore.
Integration among its different products and fungible capacity for some of its products would help it manufacture according to favorability of prices and market demand. On the other hand, regulatory issues with regard to EDA could pose challenges for them going ahead. Weighing odds, we retain our buy rating on the stock with target price of ₹1,104 (previous target ₹543) over a period of 9-12months
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