Skip to main content

Balaji Amines - An Interesting Play on Specialty Chemicals

I am in the process of studying Balaji Amines in greater details. Here are some of my thoughts.

  • From the AR - "Some of your company's new products are 100% import substitutes and other products are commanding 100% market share in India and are being exported to major customers worldwide" .... could not ascertain which specific products they are talking about.

  • Some of company's new products are 100% import substitutes and other products are commanding 100% market share
    in India and are being exported to major customers worldwide. Di-methyl amino ethanol (DMAE) plant with a capacity of 10 MT/day was commissioned during the year. This process was developed through in house R & D Team of the company. This is a forward integration project for methyl amines plant and the product has good demand in the domestic and international markets.

  • To meet the increasing domestic and international demand, new plant for manufacture of GBL and NMP with a capacity of 50 MT/day is under construction. The plant is likely to be commissioned in FY11 which will contribute both to the top line and bottom line of the Company

  • The company has a 49% stake in Balaji Greentech (www.balajigreentech.com) which makes CFLs. It may not mean much now and also the numbers are not being consolidated.
  • Input prices (methyl/ethyl alcohol) - prices of molasses have reduced so they have made a lot of cost reduction. That may reverse once molasses/ethyl alcohol prices go up.
  • They are generating most of their required capacity of electricity through their captive power plants. Setting up one more 1.5 MW wind power plant this year as well. Given the power situation and cost in Maharashtra that may be a good cost -saving move.
I am not very comfortable about the diversification into the hotel business. They could probably have thought of something else for their land. But atleast they have got away from operating it and have got Sarovar to do it. So, it might not work out badly after all. But not very comfortable.

Also, their R&D costs are capitalized to a large extent (rather than expensed) which has the possibility of raising the PAT. But realistically, the impact is not very significant as of now.

Historically the debt-equity ratio has been over 1, although it is reducing a bit now, which is another red flag. But they seem to be doing well. I am expecting a yoy PAT growth of around 25-30% this year. Long term it may revert to its mean of 20%.

I am expecting an EPS of around 38-40 this year, so at a PE of 8-10, my expected target is around 310-380, which is a significant upside from the current level (220-230).

Comments

Post a Comment

Popular posts from this blog

Porfolio Structuring (PS) Step 1: Evaluate Current Status

The first step to any long term investment plan is to understand where we are at present. So, to start with you need to list down your existing networth. For example, you can have a list as follows: Provident Fund 100,000 PPF 50,000 Bank FD 50,000 Mutual Funds-Equity 150,000 Mutual Funds-Debt 50,000 Cash In Savings Account 30,000 House 2,000,000 Housing Loan -4,000,000 Others 0 Total -1,570,000 A couple of things to note here. 1. I am not calculating the value of any gold/silver jewellery that you may be having. Indians, typically are not very keen on selling their family gold/silver so it really does not count as investment. You can think of it as an additional bonus if you do have gold/silver. 2. I am including the housing loan you may have as a negative here under the assumption that that is your primary home and not a second home bought for investment purpose. Also, I am ...
Post a Comment
Read more

Old friends reunite

This weekend was great. Saturday we went to the Alumni Association of our school (AGCS). I met a lot of old friends after over 14 years. I met Irshad, Tabish, Hemant, Debarshi Ganguly, Durjoy Sengupta, Rajni and Kavita after 1995. It felt really nice to see these people. Sandip (Das) is now in Calcutta for a vacation. So, today we met at Tung Fong, Park Street. Sandip and his wife, Sudipta and his wife, Biswajit and me. Sanjoy and Chotu came late, nearly the time when it was time for Bishu and me to leave. It's nice and cold in Calcutta now, so it was good to go to Park Street in the evening. The good thing was I managed to come out without eating a lot, so the new year resolution is on track.
Post a Comment
Read more

How to free up upto 20% of your work time?

Ever felt swamped with work and not know how to get all your ToDo's done? Well, I have. Plenty of times. Ever wonder how some people seem to get so much on their plates and yet get so much done? The trick they use is the art of delegation . Here are some of the tips I have learnt from some of those who possess Ninja-like abilities to delegate. Step 1: Find the right person for the job - Think about who in your team would be the best fit for the work-at-hand. Don't "dump" your work on the person person you see. If it is grunt-work which no one likes to do, then rotate it amongst the team (and don't forget your turn!) Step 2: Explain "why" he is the right person to do the work and what he stands to gain - If you do step 1 well, you should be able to explain why you have chosen the person and what he stands to gain from the experience. I have learnt a lot from my managers who have delegated work to me. It has given me a glimpse into areas of work t...
Post a Comment
Read more