Alkyl Amines - Supply Glut In The Domestic Market: HDFC Securities

HDFC Securities Institutional Equities

We maintain Sell on Alkyl Amines Chemcials Ltd. with a price target of Rs 1,756 (weighted average cost of capital 12%, terminal growth 5%). Capacity addition in methylamines and its derivatives by domestic players and continued aggressive dumping by Chinese manufacturers in ethyl amines shall limit volume growth and expansion in margins.

Demand in the domestic market, particularly from pharmaceuticals, was encouraging in FY24.

We expect volume growth to remain below 10% YoY while product prices could increase in line with raw material prices. Investigation of anti-dumping concerning imports of acetonitrile originating from China, Russia, and Taiwan has been initiated.

If the Directorate General of Trade Remedies imposes anti-dumping duty on imports from these countries, our Ebitda and adjusted profit after tax estimates will jump by 16/19% in FY25 and 9/11% in FY26.

Softening in power and fuel costs and operating leverage will help increase the Ebitda margin.

We expect Ebitda/adjusted profit after tax to grow at a CAGR of 19/21% over FY24-27E and return on capital/return on capital employed to improve from 12.2/15.7% in FY24 to 11.4/14.8% in FY27. Currently, the stock is trading at 55/43.5 FY25/26.

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