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Emkay Global
BASF (Buy)
Target: ₹2,700
CMP: ₹2,427.60
Q4 sales beat our estimates by 17 per cent, supported by better-than-expected growth in agriculture, materials and industrial solutions. EBITDA was ahead by 12 per cent mainly due to lower SG&A expenses (as per cent of sales), while gross margins rose slightly by 30 bps y-o-y.
Agriculture, Industrial Solutions, Nutrition & Care and Chemicals posted strong growth of nearly 56 per cent, 71 per cent, 38 per cent and 62 per cent y-o-y, respectively, led by rebound across end-user industries and robust pricing environment. BASF declared a final dividend of ₹10/share for FY21.
Surface Technologies declined nearly 43 per cent due to sale of the construction chemicals business, while materials was up 77 per cent due to the absorption of BASF Polyamides (BPPIPL), making it incomparable y-o-y.
BASF India's growth potential remains favorable in the long term, backed by a recovery in end-user industries and management's strategic initiatives. However, in our view as pricing benefits will subside gradually, we marginally raise our FY22/23 EPS estimates by 3-4 per cent and arrive at a revised target price of ₹2,700 (28x FY23E). We maintain Buy with Equal weight stance in EAP
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