Target: ₹2,653

CMP: ₹2,062.35

On the back of destocking of inventory by Chinese companies and end user industry facing headwinds along with lower realisation in key products, Balaji Amines revenue fell 34.6 per cent from ₹585.95 crore in Q3-FY23 to ₹383.36 crore in Q3-FY24. These headwinds also impacted the saleable volumes which saw a drop of 4.4 per cent to 26,903 mt in Q3FY24 as against 28,147 mt in Q3FY23.

Volumes could however revive in the next few quarters as pharma & API industry appears to have turned a corner.

The stock currently trades at 35.1x FY24e EPS of ₹58.67 and 23.3x FY25 EPS of ₹88.42. In 9MFY24 company faced lot of headwinds including dumping by Chinese manufacturers, macro challenges in end user industry and volatility in raw material prices. However, as intensity of destocking gets reduced and raw material price starts stabilising, margin will further improve from next fiscal onwards.

BAL’s backwardly integrated capacities coupled with process specialisation lend its durable competitive advantage. Earnings are estimated to rise by over 50 per cent (though on small base) next fiscal.

Weighing odds, we retain our ‘buy” rating on the stock with target price of ₹2,653 (previous target ₹3,364) based on 30x FY25 EPS of ₹88.42 over a period of 9-12 months.