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Healthy volume growth offset by pricing pressure

* Alkyl Amines Chemicals (AACL)’s 2QFY25 revenue increased 18% YoY to INR4.1b. Volume growth of 17% YoY was aided by healthy domestic volumes and exports, offset by persistent pricing pressure from Chinese suppliers. Gross margin declined 30bp YoY to 45.4%, while EBITDAM stood at 17.7%. PAT came in at INR475m vs. our estimate of INR406m.

* The management highlighted that destocking is easing currently in the pharma sector, while the agrochemical sector continues to face pressure in terms of demand and pricing. Imports continue in Acetonitrile (ACN) and Mono Isopropyl Amine (MIPA). There was an oral hearing with respect to antidumping duty (ADD) on ACN and ADD is likely to be imposed in the next 3-4 months. MIPA would remain under pressure for the next 9-12 months.

* AACL has announced a new capex of INR1.2-1.5b, with Phase I expected in the next 15 months. The capex is for an import substitution product (to be commissioned between 15-50 months), which is not part of its existing portfolio. It would be manufactured at the Dahej site and cater majorly to the existing customer base. This new product is a part of the capex announced a couple of years ago for five new products.

* The company has maintained its market share in ACN despite intense competition from Chinese suppliers. Its new Ethylamines plant is now running at better utilization than expected by the management compared to FY24. Utilization of its Di Ethyl Ketone (DEK) product has not improved so much as the management expected. AACL would focus on volume growth more, with the hope of a margin recovery going forward.

* Despite an in-line performance in 2QFY25 (barring other income), we reduce our EBITDA/PAT estimates by 12%/10% for FY25, 7%/10% for FY26 and 7%/9% for FY27 due to the continued pricing pressure. We now expect a CAGR of 18%/29%/33% in revenue/EBITDA/EPS during FY24-27 (due to the lower base in FY24). We reiterate our Neutral rating on AACL with a TP of INR2,095, based on 35x Sep’26E EPS.

EBITDA in line; PAT beat led by higher-than-expected other income

* Revenue was at INR4.1b (est. INR4b, +18% YoY). Gross margin stood at 45.4%, with EBITDAM of 17.7% (vs. 13.7% in 2QFY24).

* EBITDA came in at INR735m (est. INR710m, +52% YoY), while PAT stood at INR475m (est. INR406m, +74% YoY).

* In 1HFY25, revenue was at INR8.1b (+7% YoY) and EBITDA stood at INR1.5b (+25% YoY). PAT came in at INR963m (+25% YoY), whereas EBITDAM stood at 18.7% (+270bp YoY). The implied 2HFY25 revenue/EBITDA/PAT growth is 24%/18%/31% YoY.

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