BASF India Limited Q2FY18 Result Analysis 18 November 2017 CMP (INR): (Nov 17, 2017) 1946.05 Revised Target (INR) 2338 Upside(%) 20% Recommendation : BUY BSE Code 500042 NSE Code BASF Reuters Ticker BASF.BO Bloomberg Ticker BASF IN Stock Scan Market cap (INR Cr.) 8423.60 Outstanding Shares (Cr.) 4.32 Face Value (INR) 10.00 Dividend Yield(%) 0.06 P/E (x) N.A Industry P/E (x) 22.38 Debt/Equity 0.96 Beta vs. Sensex 0.92 52 Week High/ Low (INR) 1980/990 Avg. Daily Vol (NSE)/1 year 28202 Shareholding Pattern (%) Sept-2017 June-2017 Mar-2017 Promoters 73.33 73.33 73.33 Institutions 9.74 9.86 9.76 Non-institutions 16.92 16.80 16.90 Stock vs. Nifty (Relative returns) 170 140 110 80 50 17-Nov-16 17-Feb-17 17-May-17 17-Aug-17 17-Nov- BASF India Nifty Source: NSE Research Analyst: Mononita Mitra m.mitra@smifs.com Company Overview BASF India Limited is a chemical company engaged in the business of manufacturing and marketing of chemicals. BASF India Ltd is a part of BASF SE, the largest chemical company in the world. The company s segments include Agricultural Solution, Performance Products, Chemicals, Functional Materials & solutions among others. The company caters to the needs of various industries including agriculture, automotive, pharmaceuticals, textiles, leather, paper, cosmetics, plastics, pharmaceuticals, packaging and insulation. Q2 FY2018 Result Highlights The topline for the quarter increased 3.85% YoY to INR1455.14 Crore. This is included in the other operating revenue of the company includes an export incentive income of INR18.6 Crore this quarter. Revenue from operations for the quarter doesn't include GST, however the revenue from operations till June 30, 2017 includes the excise duty. On a comparable basis, revenue from operations (net of GST/excise) increased by 13% YoY. The revenue for the first half of FY17 grew 6.55% YoY to INR3104.56 Crore. Revenue from operations net of GST and Excise duty for six months ended Sept 30, 2017 increased 10% YoY. The EBITDA for the quarter increased 117.47% YoY. The margin for the quarter came in at 7.86% as against 4.99% reported for the corresponding quarter last year. Sequentially, the EBITDA was 63.43% up. In H1FY18 EBITDA grew 23.58% YoY to INR184.35 Crore. The finance cost increased by 18.19% YoY to INR34.62 Crore mainly because of exchange differences arising from foreign borrowings. The company reported a PAT of INR172.91 Crore this quarter as against a loss of INR19.39 Crore reported for the same quarter last year. The PAT for the quarter includes an exceptional item of INR131.71 Crore. The exceptional items includes profits of INR155.96 Crore from divestiture of industrial coatings business and write down of thermoplastic polyurethane (TPU) assets for INR24.25 Crore due to cessation of its manufacturing. H1FY18 reported a PAT of INR173.59 Crore as against a loss of INR9.58 Crore for the same period last year. Financial Performance at a glance (Standalone) Particulars (INR Cr) FY 2015 FY 2016 FY 2017 FY 2018E FY 2019E Net Sales 4694.88 4729.66 5065.78 6000.00 6655.60 Growth(%) 6.25% 0.74% 7.11% 18.44% 10.93% EBITDA 133.36 256.69 271.32 480.00 652.25 EBITDA Margin (%) 2.84% 5.43% 5.36% 8.00% 9.80% Net Profit -66.90-30.37-27.89 495.22 304.43 Adjusted Net PAT -96.09-202.48-44.90 166.51 284.43 Adj. Net Profit Margin (%) -2.05% -4.28% -0.89% 2.78% 4.27% EPS (INR) -22.24-46.87-10.39 38.54 65.84 BVPS (INR) 268.47 257.83 254.65 293.19 359.03 P/E (x) - - - 50.49 29.56 P/BV (x) 4.67 3.39 5.36 6.64 5.42 ROE (%) -0.08-0.18-0.04 13.15% 18.34% EV/EBITDA (x) 44.10 47.15 25.46 20.02 14.64 Mcap/ Sales 1.03 0.80 1.16 1.40 1.27 1
Financial Analysis for the quarter ending September 30, 2017 (Standalone) Particulars (in INR Crore) Quarter Ended Half year ended Q2 FY18 Q2 FY17 YoY % Q1 FY18 QoQ % H1 FY18 H1 FY17 YoY% Gross Revenue from operations 1455.14 1401.17 3.85% 1649.42-11.78% 3104.56 2913.80 6.55% Sale of Products 1392.92 1341.63 3.82% 1597.59-12.81% 2990.51 2798.38 6.87% Sale of Services 40.29 51.61-21.93% 48.86-17.54% 89.15 102.56-13.08% Other Operating Revenue 21.93 7.93 176.54% 2.97 638.38% 24.90 12.86 93.62% Excise duty NA 109.26 NA 139.28 NA 139.28 227-38.64% Net Revenue from operations 1455.14 1291.91 12.63% 1510.14-3.64% 2965.28 2686.80 10.36% Cost of material Consumed 689.04 549.79 25.33% 710.37-3.00% 1399.41 1252.07 11.77% Purchase of stock-in Trade 302.58 410.39-26.27% 453.08-33.22% 755.66 729.46 3.59% Changes in inventories of finished goods, stock-in trade and work-in progress 72.49-8.1 994.94% -44.92-261.38% 27.57-3.47 894.52% Employee benefit expense 88.14 80.11 10.02% 92.46-4.67% 180.6 163.38 10.54% Other expenses 188.52 207.13-8.98% 229.17-17.74% 417.69 415.12 0.62% Total Expenses 1340.77 1239.32 8.19% 1440.16-6.90% 2780.93 2556.56 8.78% EBITDA 114.37 52.59 117.47% 69.98 63.43% 184.35 130.24 41.55% EBITDA margin (%) 7.86% 4.07% 379 bps 4.63% 323 bps 6.22% 4.85% 137 bps Other income 2.38 0.73 226.03% 0.3 693.33% 2.68 6.13-56.28% Depreciation & amortization 40.13 41.76-3.90% 39.18 2.42% 79.31 85.04-6.74% EBIT 76.62 11.56 562.80% 31.10 146.37% 107.72 51.33 109.86% EBIT Margin (%) 5.27% 0.89% 438 bps 2.06% 155.68% 3.63% 1.91% 361 bps Interest cost 34.62 29.29 18.20% 30.42 13.81% 65.04 60.79 6.99% Profit before tax and exceptional item 42.00-17.73 336.89% 0.68 6076.47% 42.68-9.46-551.16% PBT and exceptional item margin (%) 2.89% -1.37% 426 bps 0.05% 284 bps 1.44% -0.35% 179 bps Exceptional items 131.71 NA 100% NA 100% 131.71 1.55 8397.42% PBT 173.71-17.73 1079.75% 0.68 25445.58% 174.39-7.91 2304.68% Tax 0.8 1.66-51.81% 0 100% 0.8 1.66-51.81% Profit after tax 172.91-19.39 991.75% 0.68 25327.94% 173.59-9.57 1913.90% PAT margin (%) 11.88% -1.50% 1338 bps 0.05% 1183 bps 5.85% -0.36% 621 bps Other Comprehensive Income, net of tax 0.19-0.27 170.37% -3.68 105.16% -3.49 1.37-354.74% Total Comprehensive Income 173.10-19.66 980.46% -3.00 5870% 170.10-8.20 2174.39% EPS 39.98-4.54 980.47% -0.69-5856.67% 39.38-1.90 2174.39% 2
Financial Analysis for the quarter ending September 30, 2017 (Standalone) Segment-wise Result Highlights Particulars (INR Cr.) Quarterly Analysis Six Months Ended Sep-17 Jun-17 Sep-16 QoQ % YoY % Sep-17 Sep-16 YoY % Revenue (Total) 1455.14 1649.42 1401.17-11.78% 3.85% 3,104.56 2,913.80 6.55% Agricultural Solutions 280.68 339.22 239.93-17.26% 16.98% 619.90 542.01 14.37% Performance Products 565.35 614.59 556.52-8.01% 1.59% 1,179.94 1140.33 3.47% Chemicals 78.43 61.17 48.84 28.22% 60.59% 139.60 105.49 32.33% Functional Materials 523.46 625.54 521.63-16.32% 0.35% 1,149.00 1066.17 7.77% Others 7.22 8.9 34.25-18.88% -78.92% 16.12 59.80-73.04% PBIT (Total) 85.10 39.07 18.34 117.81% 364.01% 124.17 64.17 93.50% Agricultural Solutions 39.08 15.47 1.85 152.62% 2012.43% 54.55 1.74 3035.06% Performance Products 40.47 5 9.17 709.40% 341.33% 45.47 32.93 38.08% Chemicals 10.02 12.94 6.01-22.57% 66.72% 22.96 17.89 28.34% Functional Materials -6.32 5.19-0.14-221.77% 4414.29% -1.13 8.72-112.96% Others 1.85 0.47 1.45 293.62% 27.59% 2.32 2.89-19.72% Note: The chemicals and the agri solutions business grew the most this quarter as compared to the same quarter last year. The chemicals business includes monomers, intermediates and petrochemical business and it grew 60.59% YoY. The agrochemical business and the chemical business saw rise in assets. The assets in the chemical business mainly surged because of the increase in capacity of chemicals in the Dahej plant. The capital employed in the agri Solution business also increased from 40.11 Crores to 122.12 Crores, up by 204.46%. This is because the company introduced 11 new crop protection products this quarter in agri segment. Valuation The company is now on a sound footing as all the technical problems at Dahej site are resolved. The agrochemical business which suffered from single crop dependence will also gain momentum as the company received approval for 11 new products. The company also expanded capacity of Cellasto " microcellular polyurethane manufacturing at Dahej in Gujarat, which demonstrate that the company is optimizing its manufacturing assets to meet the needs of the customers. At the same time, previous TPU production in Dahej is also discontinued. This was a part of the restructuring strategy of the company. Considering such a favourable situation we assign a EV/EBITDA of 17.40x for its FY19(E) EBITDA and revise the target Price to INR2338 from our previous target price of INR2122. 3
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