KRChoksey Research reiterates its BUY recommendation for Balaji Amines Ltd with a revised target price of Rs 2,328, reflecting a potential upside of 16.6% from the current market price of Rs 1,996. While the company faced headwinds in Q2FY25 due to lower volumes and pricing pressures in key segments like pharmaceuticals and agrochemicals, it is poised for long-term growth driven by capacity expansions, a strategic shift to high-margin specialty chemicals, and international demand recovery. Gross margins expanded despite revenue contraction, reflecting a favorable product mix.

KRChoksey Maintains BUY on Balaji Amines

Recommendation Overview
KRChoksey highlights Balaji Amines’ resilience and long-term growth potential amid near-term challenges. The BUY rating is supported by expectations of improving volumes and margins as new capacities scale up and high-margin product contributions increase.

Q2FY25 Performance: A Mixed Bag

Revenue Miss

Revenues for Q2FY25 declined 8.8% YoY to Rs 3,469 million, impacted by sluggish demand in pharmaceuticals and agrochemicals.
Total volumes contracted by 4.6% YoY to 26,347 MT, driven by weak offtake in core markets.
Margin Resilience

Gross margins improved by 422 basis points (bps) YoY to 45.8%, supported by the strategic shift toward specialty chemicals.
EBITDA margins expanded to 17.5%, up 336 bps YoY, despite operating deleverage.
Profit Decline

Adjusted PAT increased 18.1% YoY to Rs 410 million, but profitability was impacted by higher depreciation and weak volumes.

Segment-Wise Highlights

Specialty Chemicals

Specialty chemical volumes grew 8.2% YoY, contributing 38.1% of total volumes, reflecting a strategic focus on high-margin products.
Amines and Amines Derivatives

Amines volumes declined 5.9% YoY, while derivatives saw a steeper decline of 15.2% YoY.
Price realization faced pressure from cheaper imports, particularly from China, in products like Dimethylformamide (DMF) and N-Methyl-2-Pyrrolidone (NMP).
Export Opportunities

Anti-dumping measures in Europe and the US against Chinese products present a significant growth avenue for the company’s specialty chemicals.

Strategic Initiatives and Growth Catalysts

Capacity Expansion

Commissioned a new methylamines plant at Unit 4, increasing capacity from 48,000 MT to 88,000 MT, with full utilization expected by FY26E.
Upcoming DMC Propylene Glycol and Dimethyl Ether plants are set to drive growth in FY25E and beyond.
High-Margin Product Focus

New specialty chemicals like N-(n-butyl) thiophosphoric triamide (NBPT) and advanced acetonitrile grades are expected to boost profitability.
Sustainability Initiatives

The company is setting up an 8 MW solar power plant, anticipated to significantly reduce energy costs by FY25E, improving operational efficiency.

Outlook: Positioned for Long-Term Growth

Volume Recovery

Volumes are expected to grow 10–12% YoY in H2FY25E, with acceleration from FY26E as newly commissioned capacities reach optimal utilization.
End-Market Revival

EV-related products like NMP and electrolytes, already approved by battery manufacturers, are expected to witness demand traction as India’s EV sector scales up.
Revenue and Profitability Forecasts

Revenue is projected to grow at a 9.8% CAGR over FY24–FY26E, reaching Rs 19,782 million in FY26E.
Adjusted PAT is expected to grow at a 30.9% CAGR, supported by a higher contribution from high-margin segments.

Valuation and Risks

Valuation Metrics

The stock trades at a P/E of 18.4x FY26E EPS, with a revised EPS estimate of Rs 108.3 for FY26E.
The target price of Rs 2,328 reflects a robust recovery in volumes, margins, and long-term growth.
Risks

Prolonged pricing pressures in bulk chemicals could impact margins.
Delayed adoption of EV-related products may defer revenue realization.
Increased imports and competitive pressures in specialty chemicals pose additional risks.

Investment Rationale

Growth Potential
Balaji Amines’ strategic investments in capacity expansion and focus on high-margin products position it for sustained growth. The company’s ability to navigate pricing pressures and capitalize on international opportunities reinforces its long-term potential.

Conclusion
KRChoksey advises investors to BUY Balaji Amines, given its strong fundamentals, favorable industry dynamics, and strategic focus on profitability. The stock offers significant upside, supported by robust growth drivers and operational resilience.