Balaji Amines Ltd (BAL) is one of the largest Amines & Amine derivatives player in India. This field is limited to a handful of players as the technology is not freely available. Over the years, BAL has been developing newer products and technologies to maintain its leadership position, through its in-house R&D department. As of now, BAL is one of the lowest cost producer in the industry.
Methlyamine (20,000 MTPA) and Ethylamine (6,000 MTPA) are their core products and with leadership position, the earnings from these products remain stable. Over the last 4-5 years, the co has been doing a lot of R&D to develop new high potential products. Here is a snapshot of the R&D expenses:
| R&D Expenditure (Cr.) |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
| Capital Exp |
0.00 |
5.90 |
2.97 |
4.19 |
16.03 |
6.22 |
| Revenue Exp |
0.14 |
1.12 |
1.37 |
0.54 |
0.00 |
2.78 |
| Total |
0.14 |
7.02 |
4.34 |
4.73 |
16.03 |
9.00 |
New Products are – NMP, Morpholine, PVP etc. Among these, NMP & Morpholine have started doing well and BAL has plans to triple the capacity (in phases) of NMP by the end of this year. PVP is a high potential, high margin product and the company has been able to break into the monopoly of international players like BASF, Huntsman etc. BAL is waiting for regulatory approvals like EU – GMP, USFDA etc to market the product and scale up production. If successful, it can be a big trigger as the margins will be very high in this segment.
BAL caters majorly to the Pharma industry and has relationship with some of the leading players like – Sun Pharma, Ranbaxy, Matrix etc. It also supplies to Agro Chemicals, Refineries, Rubber etc industries.
Good Past track record:
- From a modest beginning, the company has come a long way. The turnover has grown consistently at CAGR of 27.61% over last 11 years from 23 Cr turnover in 2000 to 262 Cr turnover in 2010.
- The profitability has had a similar strong growth.
- Over the years company has become backward integrated by way of in-house R&D.
Future Growth triggers:
- Major expansion in the capacity of NMP is coming up by the year end. BAL is expanding the capacity from 6000 MT to 22000 MT.
- Company has a good land parcel in centre of Solapur. Company is in process of setting up a 4 Star hotel with 100 rooms and use the additional land for corporate office purpose.
- BAL is trying to get mandatory approvals for commercial exploitation of its new product – PVP which has high potential.
- BAL has also planned a major expansion of its core product – Methyl & Ethyl amine.
Valuations:
- After going through consolidation phase during 2008-2009, the company is back to growth phase and is expecting to @ 35% to 350 Cr turnover.
- BAL may be able to do an EPS of over 40 this year and stock is available at 6 times expected earning.
- The company has a BV of 140.
- For FY 2012, BAL may very well do a turnover of over 500 Cr.
- The company has announced stock split from Rs 10 to 2.
Risks:
- The company has a high debt and as the company has announced a hotel project, the debt may increase further and put pressure on earnings.
- Chemical industry can have volatile phases hence giving lumpy earnings.
Valuation Sheets:
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