Neutral Alkyl Amines Chemicals Ltd for the Target Rs 1,950 by Motilal Oswal Financial Services Ltd
Improving demand and margin expansion drive earnings
* Alkyl Amines Chemicals (AACL) reported a robust operating performance in 1QFY27, with EBITDA increasing 74% YoY. Effective pass-through of raw material costs, coupled with higher operating leverage, led to a 640bp YoY expansion in EBITDA margin to 25.3%.
* We expect growth momentum to improve steadily, driven by rising demand from the pharma segment, particularly peptides, along with healthy demand from agrochemicals and rubber chemicals. Growth will also be supported by the company’s focus on expanding market share in existing products and foraying into new product categories.
* On the back of robust operating performance, we increase our FY27/FY28 earnings estimates by 28%/17% and value the stock at 40x FY28E EPS to arrive at a TP of INR1,950. Reiterate Neutral.
Broad-based outperformance across revenue and profitability
* Revenue grew 30% YoY and 36% QoQ to INR5.2b (est. INR4.2b), while gross margin expanded 340bp YoY and 340bp QoQ to 49.2%.
* EBITDA margin expanded 640bp YoY and 700bp QoQ to 25.3% (est. 17.2%). Employee costs as a percentage of sales stood at 6.9% (vs. 6.7% in 1QFY26), while other expenses stood at 17.1% vs. 20.2% in 1QFY26.
* EBITDA stood at INR1.3b (est. INR732m), rising 74% YoY but declining 89% QoQ.
* Adjusted PAT stood at INR946m (est. INR473m), rising 91% YoY and 2.1x QoQ.
Valuation and view
* We expect AACL’s growth to be aided by:
i) the planned commercialization of a new product at the Kurkumbh facility in 2QFY27
ii) additional products in the R&D pipeline
iii) the anti-dumping duty on acetonitrile
iv) scope for higher capacity utilization, driving operating leverage
v) rising demand from the pharma segment
6) in-house R&D facility’s continued development of high-quality products.
* We estimate a CAGR of 11%/16%/19% in revenue/EBITDA/PAT over FY26-28 and increase our FY27/FY28 earnings estimates by 28%/17%. We value the stock at 40x FY28E EPS to arrive at a TP of INR1,950. Reiterate Neutral.
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