Balaji Amines - Takeaways from their quarterly conference call

Balaji Amines had a conference call on July 28, 2011.

Here are the key takeaways from it:-

1. Methyl Amine capacity is getting increased from 24,000 to 54,000 tons
2. Production of dimethylformide is to start by end of 2013. Total capacity planned is 30,000 tons. Currently, only RCF manufactures this in India and has a capacity of 5,000 tons. India imports the rest of the demand of around 30,000 tons. After Balaji's capacity comes online, India may be in a position to meet all of its needs domestically with some export opportunities as well.
3. The expected revenue from both these initiatives from a 3-year timeframe (2014-15) is about 350 cr. 180 cr is expected from the methyl amine expansion and another 170 cr from  dimethylformide.
4. The company has filed for European DMF for PVP K30. It will take about 6-8 months to get approval. Once approved, the company will be able to export PVP K30 to Europe.
5. The interest costs have gone up dramatically from 9-10% to 13.5-14% currently. This has resulted in high interests costs this quarter and is likely to remain like this for the next few quarters.
6. Prices of key raw materials have also increased after accidents in BASF and Nan Ya Plastics, two large global suppliers.
7. The company has a capex plan of 70 cr out of which 50 cr is for the methyl amine expansion and 20 cr for setting up dimethyl formide production.
8. Company has a working capital loan of about 80-85 cr and total loan book of 157 cr.
9. The newly added capacities are working at 40-50% of capacity currently.
10. The company is targeting a topline of 420-450 cr in FY12
11. The company is targeting a PBT of 47-48 cr in FY12
12. The promoter holds 54% of the company's stock and another 20% is held by close relatives. 20% of promoter holding is pledged to banks to get beneficial terms for the term loans.

Results Update - Supreme Industries, Balaji Amines

Supreme Industries (Consolidated):

	Q4 2010	Q4 2011	% Growth	FY 2010	FY 2011	% Growth
Sales	669.98	732.52	9.33%	2007.02	2436.2	21.38%
Op Profit	100.82	113.94	13.01%	298.68	357.39	19.66%
Net Profit	51.91	60.25	16.07%	155.98	195.84	25.55%
EPS	4.09	4.74	15.89%	12.28	15.42	25.57%
Cash EPS	5.28	6.01	13.83%	16.45	20.29	23.34%
Op Margin	15.05%	15.55%		14.88%	14.67%
Net Margin%	7.75%	8.23%		7.77%	8.04%
RoCE%	7.47%	8.70%		21.95%	26.35%
RoE%	9.48%	11.00%		28.48%	35.76%
Assets	1138.48
Net worth	547.71
Loaned Funds	511.24

• Dividend of Rs 3 per share has been declared.
• No news on the real estate sale. 
• Q4 growth has been muted, although annual results are reasonably good.
• Net margins have been consistently been increasing last few years. Stands at 8.04% vs 7.77% last year and has actually doubled in the last 5 years from 4% in 2006.

Balaji Amines

	Q1 2010	Q1 2011	% Growth
Sales	78.91	114.52	45.13%
Op Profit	12.03	15.04	25.02%
Net Profit	6.22	7.17	15.27%
EPS	1.92	2.21	15.10%

• Interest outgo has nearly than doubled - from 2.65 cr to 4.95 cr

Balaji Amines - Results Update

Balaji Amines came out with their quarterly results today.

Sales grew from 63.67 cr to 96.69 cr (growth of 51.86%)
Operating profit grew from 9.18 cr to 15.99 cr (growth of 74.18%)
Net profit grew from 4.21 cr to 8.72 cr (growth of 107.13%)
EPS has grown from (1:5 split adjusted) 1.3 to 2.69 (growth of 106.92%)

Note: These are yoy Q3 comparisons.

Balaji Amines: An Update

Balaji Amines has moved down from around Rs 56-58 the current levels of Rs 40-42. I am actually expecting it to do better than 7 EPS for Fy11. Pre-split my expectation was around Rs 35-38 for FY11 and Rs 44-46 for Fy12. ( I would not be very surprised if it does a little better than that). That means an EPS of 7-7.6 in FY11 and 8.8-9.2 in FY12.

Balaji's core business is doing well. Realizations have improved and the new product Morpholine is likely to enjoy better margins as it may attract anti-dumping duty in India.

This stock is a good candidate for attractive returns for the medium term (2-3 years) with a tentative price target of 70-80 by Mar-Apr 2011 and 95-100 by Mar-Apr 2012.