Balaji Amines Multibagger

Balaji Amines is already a multibagger stock. The stock has given a return of 334% over 24 months. It has given a return of 1000% over the past five years.

The stock is still a small-cap stock with a market capitalisation of Rs. 1780 crore. It can be a multibagger even from this stage.

Research report by GEPL

There is a research reports from GEPL which has recommended a buy of the stock.

Company Snapshot

Balaji Amines Ltd.,is an ISO 9001: 2008 certified company, specialized in manufacturing Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products. These have been the main products; it also has facilities for the manufacture of derivatives, which are downstream products for various Pharma /Pesticide industries apart from user specific requirements. Balaji Amines Limited (BAL), is one of the leading manufacturers of Aliphatic Amines in India was set up in the year 1988 to cater to the growing requirements of value based Specialty Chemicals. BAL commenced manufacture of Methyl Amines in the year 1989 and subsequently added facilities for manufacture of Ethyl Amines and other derivatives of Methyl Amines and Ethyl Amines.

Investment Rationale

Unique business structure provides an edge over its peer

Balaji Amines has unique business structure. It is one of the leading manufacturers of Aliphatic Amines. It specialized in manufacturing Methylamines, Ethylamines and derivatives of them. The company enjoys leadership position in many of its products like Monomethylamine (MMA), Dimethyl amine (DMA), Trimethylamine (TMA), Dimethyl Amino Ethanol (DMAE), Mono Methyl Amino Ethanol etc. It caters to host of industries like Pharma (51% of revenues), , Agro Chemicals (26%), Paint Stripping & Resins, Rubber cleaning etc. The company has three state of the art units – two near Solapur and one near Hyderabad. In addition Balaji possess a fully furnished Laboratory which helps the company in development of newer products. It also operates a 5 start hotel in Solapur – Balaji Sarovar, the only 5 star properties in the city.

Niche play provides high growth momentum in the upcoming period

Worldwide Amines technology is a closely guarded process with only few handful companies having access to such technology. For the first time in India, Balaji tests on a indigenously developed products and over the years has become a leading player in the segment and commands healthy market share of 60-70% in domestic region for various products. Balaji has mastered the complex process which we believe, would act as a major entry barrier for domestic competitors and would provide revenue visibility and stable profitability.

Robust Financials makes Balaji Amines lucrative

Consistent growth in the top line also backed by operating margin improvement makes Balaji Amines more lucrative. Consolidated EBITDA margins have improved to 20.9% in FY17 from 16.4% in FY13. This shows that company has improved in operating efficiency. A net profit margin has also improved to 12.8% in FY17 from 6.1% in FY13. Return on equity has improved from 18.3% in FY13 to 23% in FY 17. ROCE has shown strong growth of 9.6% in FY13 to 19.1% in FY17. This makes Balaji Amines a safer bet as compared to others. We believe that this will create a great opportunity for the investor for longer term horizon.

Valuation

At CMP of Rs 574, Balaji Amines Ltd. is trading at 22.5 xs at its FY17 earnings of Rs 25.4. With strong margin improvement and strong Business perspectives; We expect stock to trade at 21.4x its FY19E earnings of `33.9. We assign a BUY rating on the stock with a price target of Rs. 725 which is more than 26% upside from current levels.

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