ALKYL AMINES CHEMICALS LTD Result Update: Q4 FY 12 SYNOPSIS. C.M.P: Rs Target Price: Rs Date: July 2 nd 2012 BUY. Share Holding Pattern

Transcription

1 ALKYL AMINES CHEMICALS LTD Result Update: Q4 FY 12 C.M.P: Rs Target Price: Rs Date: July 2 nd 2012 BUY Stock Data: Sector: Commodity Chemicals Face Value Rs wk. High/Low (Rs.) /70.20 Volume (2 wk. Avg.) BSE Code Market Cap (Rs in mn) Share Holding Pattern SYNOPSIS We initiated coverage of Ltd and set a target price of Rs for Medium term Investment. Alkyl Amines Chemicals Ltd is a global supplier of amines and amine-based chemicals to the pharmaceutical, agrochemical, rubber chemical & water treatment industries, among others. During the quarter, the robust growth of Net Profit is increased by % to Rs million. 1 Year Comparative Graph The company has recommended a dividend of Rs. 4 per share, approval of the shareholders on 22 nd May, The company commissioned for commercial production its Acentonitrile plant at Kurkumbh. BSE SENSEX ALKYL AMINES CHEMICALS Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 32% over 2011 to 2014E respectively. Years Net sales (Rs. mn) EBITDA (Rs. mn) Net Profit (Rs. mn) EPS(Rs) P/E FY FY 13E FY 14E

2 Peer Group Comparison Name of the company CMP(Rs.) Market Cap. (Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%) Alkyl Amines Chemicals ltd Tata Chemicals Sukhjit Starch & Chemicals Kanoria Chemicals Investment Highlights Q4 FY12 Results Update Alkyl Amines Chemicals Ltd has reported net profit of Rs million for the quarter ended on March.31, 2012 as against million in the same quarter last year, an increase of %. It has reported net sales of Rs million for the quarter ended on March.31, 2012 as against Rs million in the same quarter last year, a rise of 25.15%. Total income grew by 25.14% to Rs million from Rs million in the same quarter last year. During the quarter, it reported earnings of Rs 6.38 a share. Quarterly Results - Standalone (Rs in mn) As At Mar-12 Mar-11 %change Net sales PAT Basic EPS

3 Break up Expenditure Recommended Dividend Alkyl Amines Chemicals Ltd has recommended a dividend of Rs. 4 per share, subject to approval of the shareholders. Company Profile Alkyl Amines Chemicals was incorporated in 1979 with the idea of making India selfsufficient in aliphatic amines. The first plant was commissioned in 1982 at Patalganga to make ethylamine and cyclohexylamines with technology from Leonard Process Company, USA. The capacity was expanded in 1986 in the existing plant and another plant was set up in 1992 to make methylamines. Alkyl Amines Chemicals is a global supplier of amines and amine-based chemicals to the pharmaceutical, agrochemical, rubber chemical and water treatment industries, among others. Alkyl's commitment to customer satisfaction by delivering quality products and services has helped it to become one of the world's leading amine manufacturers. 3

4 The company has standards, the ISO 9001 certification has been awarded to our both sites, Patalganga & Kurkumbh for the manufacturing sites. The plant set up in technical collaboration with Leonard Process Co Inc, US, in A second plant was set up in 1991 to manufacture ethyl and methyl amines in technical collaboration with Acid Amine Technologies Inc, US. AACL's products find applications in agro chemicals, pesticides, rubber chemicals, water treatment chemicals and other specialty chemicals. Some of the new products developed by the company are diethyl hydroxylamine (DEHA), dim ethyl cyclohexylamine (DMCHA), specialty intermediates and insect repellents such as diethyl toluamide (DETA), besides dim ethyl amino propylamine (DMAPA), various hydrochlorides and specialty corrosion inhibitors. Products: Aliphatic Amines Methylamine Mono methylamine Dim ethylamine Trim ethylamine. Ethylamine Isopropyl amine Mono isopropyl amine Di isopropyl amine. Propylamine Mono-n-Propylamine Di-n-Propylamine Tri-n-Propylamine. 4

5 Butyl amine Mono-n-Butyl amine Di-n-Butyl amine Tri-n- Butyl amine. Ethylhexylamine Mono-2-Ethylhexylamine Bis-2-Ethylhexylamine. Cyclohexylamine Mono cyclohexylamine Di cyclohexylamine. Amine Derivatives Amides Diethyl-m-Polyamide Diethyl Phenyl Acetamide. Hydro chlorides Mono methylamine Hydrochloride Di methylamine Hydrochloride Tri methylamine Hydrochloride Di ethylamine Hydrochloride Tri ethylamine Hydrochloride Mixed Amines Diethyl hydroxylamine Dim ethyl amino propylamine Dim ethyl amino propionitrile Dim ethyl cyclohexylamine Di isopropyl ethylamine 5

6 Furfurylamine Tetra methyl ethylenediamine N - Methylbenzylamine ALCHAN Corrosion Inhibitors. Fine Chemicals Monoamines Diamines Polyamines Quaternary Amines Amine Hydrochlorides Amides. Industries Served: Agro Chemicals Pharmaceuticals Rubber Chemicals Paints & Dyes Water Treatment. Associate companies Diamines & Chemicals Ltd Alkyl Amines (Europe) Alkyl Specialty Chemicals Ltd. 6

7 Financial Results 12 Months Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) FY11 FY12 FY13E FY14E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Reserves Face value EPS

8 Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) 30-Sep Dec Mar Jun-12E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Face value EPS

9 Key Ratios Particulars FY11 FY12 FY13E FY14E No. of Shares(in mn) EBITDA Margin (%) 13.92% 15.15% 15.03% 15.08% PBT Margin (%) 5.75% 8.22% 8.76% 9.10% PAT Margin (%) 4.40% 5.96% 6.23% 6.49% P/E Ratio (x) ROE (%) 13.01% 19.31% 18.99% 18.11% ROCE (%) 20.97% 24.44% 24.61% 24.38% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts: Net Sales & PAT 9

10 P/E Ratio Debt Equity Ratio 10

11 EV/EBITDA (x) P/BV Ratio 11

12 Outlook and Conclusion At the current market price of Rs.98.20, the stock is trading at 4.81 x FY13E and 4.13 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 32% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 1.99 x for FY13E and 1.77 x for FY14E. Price to Book Value of the stock is expected to be at 0.91 x and 0.75 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. Industry Overview The Indian chemical industry comprises a wide and varied spectrum of products that can be sub-categorized into inorganic and organic chemicals, drugs and pharmaceuticals, plastics and petrochemicals, dyes and pigments, fine and specialty chemicals, pesticides and agro chemicals, and fertilizers. Indian Chemical Industry Market Size Post independence era has witnessed a significant contribution of Indian chemical industry to both industrial and economic growth. Accounting for 18 per cent of the output of manufacturing sector, the chemical industry forms per cent of total exports and 8-9 per cent of the total imports in India. Chemicals including petrochemicals sector contributes 3 per cent to India s GDP. The Indian chemical industry, an important constituent of the Indian economy, is valued at around US$ 35 billion. The industry, the 12th largest in production globally, 12

13 and third largest in Asia, is growing at an average rate of 12.5 per cent. Modernization of existing technology through foreign collaborations could further enhance growth. India is a promising economy that holds potential to produce quality chemicals for world consumers because of its diversified manufacturing base. A network of 200 national laboratories and 1,300 Research and Development (R&D) centers provide a strong base to the Indian chemical industry to become innovationoriented. Shifting focus towards R&D would also facilitate growing opportunities for R&D hubs and industry-specific institutes. In India a number of recent developments, such as establishment of intellectual property rights (IPR), a rapidly growing middle-class population, emerging rural markets and improvements in medical infrastructure have benefitted foreign manufacturers. Indian Chemical Industry - Market Dynamics Base Chemicals form the largest segment of the Indian Chemicals Industry (53 per cent), followed by pharmaceuticals (24 per cent). While base chemicals are raw material oriented and involve bulk manufacturing through standardized reactions, pharmaceuticals and specialty chemicals are more R&D intensive, high value and lowvolume. Petrochemicals (Olefins and aromatics) are the major sub-segment of the base chemical industry. Olefins demand in India is anticipated to grow at 10 per cent per annum while aromatics demand is expected to grow at 12 per cent per annum over Pharmaceuticals industry, forming the second largest segment with 24 per cent share, has evolved over past 30 years from a marginal global player to becoming a world leader in the production of high quality generic drugs. India exports pharmaceutical products to over 200 countries. Spurred by a strong domestic market and enhancing exports, the Indian formulations market is expected to reach US$25.6 billion in from about US$ 12.6 billion in

14 End-use industries like automotives, electronics, packaged food; textiles all are driving Indian specialty chemicals industry. Strong domestic demand coupled with huge investments by domestic and foreign players, is making the industry scale new heights. Many international companies have pledged substantial investments in potential Indian markets because of availability of vast pool of skilled and cheap labor and resources. Biotechnology, accounting for 3 per cent of the total chemicals industry, is currently pegged at US$ 4 billion. It is estimated to be worth around US$ 10 billion by New opportunities across various sectors including bio-pharma, agri-biotechnology and industrial biotechnology are expected to help the industry grow rapidly in the near future. India is the fourth largest producer of agrochemicals in the world. The Indian Agrochemicals Industry is expected to grow at 7.5 per cent, to reach over US$ 1.7 billion by 2012, driven by various factors including need for food grain self-sufficiency and the momentum in floriculture and horticulture sectors. India s 60 per cent of agrochemicals production is exported to countries like USA, UK, Russia, Europe, South Africa, Bangladesh, Malaysia etc. Industry experts expect per capita consumption of plastics in India at 27 kilograms (kg) by 2020 from 8 kg in 2010; thereby aligning the consumption with global standards. Indian Chemical Industry - Major Investments India saw around 48 mergers and acquisitions (M&A) deals in 2010 worth US$ 4.9 billion in its pharma and biotech sector. Around US$ 33 billion of investment is planned in the upstream industry to set up 11 petrochemical complexes across the country, which will enable setting up new plastic clusters around these complexes, R K Lohia, chairman, national executive committee, Plastindia 2012 pointed out. He added that this will, in 14

15 turn, provide impetus for growth of polymer consumption to over 15 million tonnes (MT) by Standard Chartered Bank s private equity segment has invested US$ 19 million in Mumbai-based Privi Organics. Privi is an aroma chemical manufacturer, whose products is used by fragrances and flavors companies and is also exported to over 25 countries. Aditya Birla Group has bought US-based Columbian Chemicals for about US$ 875 million. The Indian conglomerate has also placed simultaneous bids for two of the world's three largest carbon black assets. The group has also acquired the chloro-chemicals unit of Kanoria Chemicals & Industries for US$ 185 million in an all-cash deal. The deal will make Aditya Birla Group India's largest producer of chloral-alkali, a critical input in the aluminium sector, the group's chairman Kumar Mangalam Birla said. Reliance Industries is drawing plans to be a world leader in rubber, and is investing up to US$ 12 billion in the chemicals business to tap the rapidlygrowing market for hygiene and healthcare products, Chairman Mukesh Ambani revealed. Over-the-Counter (OTC) Russian brands of Mumbai-based JB Chemicals & Pharmaceuticals (JBCPL) are to be acquired by Johnson & Johnson (J&J) for about US$ 260 million. The deal is made by J&J s wholly owned Cilag gmbh International and is expected to get closed by mid Indian Chemical Industry - Exports During April-February 2011, exports of chemicals increased 22 per cent to US$ 7.5 billion. India has emerged as an exporter of dyes, exporting dyes to Germany, U.K., U.S., Switzerland, Spain, Turkey, Singapore and Japan. The export of dyes is expected to increase from US$ 1.5 billion in to US$ 2.6 billion in

16 Indian Chemical Industry - Government Initiatives The government has removed licensing requirements, except for hazardous chemicals and a few special drugs Entrepreneurs are allowed to set up chemicals industries following the Industrial Entrepreneurs Memorandum (IEM) route Under the automatic route, 100 per cent FDI is allowed for all chemicals except hazardous ones. Customs duty The peak rate of customs duty on most chemicals is 7.5 per cent. The Petroleum Chemical Petrochemical Investment Regions (PCPIR) Policy has been introduced to boost the development of chemicals and petrochemicals investment regions Plans are underway to set up port-based chemicals parks in SEZs to encourage clustering, provide infrastructure and enable tax concessions Road Ahead Overall, the Indian chemical industry has attained a critical size and has the potential to build a US$ billion specialty chemical industry by Asia Pacific region now forms nearly 42 per cent of the global market for chemicals, clearly making it the largest contributor. India has great opportunity to leverage on its talent pool and resources to attain a successful position in specialty chemical landscape. In addition, India has been increasing its export of chemical products in the recent years, so growth will also be a factor of buoyant exports. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. 16

17 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods Abdul Khabeer Diversified Ashish Kushwaha Diversified A.Nagaraju Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com 17