Sanasecurities

Home BASF India – Stock For the Month of May 2018

BASF India – Stock For the Month of May 2018

Date: 8 May, 2018

Price: Rs. 2,125

BASF India Limited (“BASF India” or the “Company”) operates in four business segments namely agricultural solutions, performance products, chemicals and functional materials & solutions.

  • Agricultural solutions business includes agrochemicals like insecticides, herbicides, fungicides and specialties.
  • Performance products segment includes performance chemicals, dispersions and pigments, care chemicals, nutrition, health products and paper chemicals.
  • Functional material & solutions segment comprises of the coatings & construction chemicals, performance materials and process catalyst technologies.
  • Chemical segment includes intermediates, petrochemicals and monomers.

The Company caters to the needs of various industries including agriculture, automotive, pharmaceuticals, textiles, leather, paper, cosmetics, plastics, pharmaceuticals, and packaging.

Financial Position

Financial Position

Particulars (In Rs. Cr.)

2013

2014

2015

2016

2017

Total Income from Operations

3,940.63

4,429.89

4,705.76

5,156.82

5,525.79

Expenses

3,688.68

4,145.70

4,572.73

5,051.05

5,256.11

EBITDA

251.95

284.19

133.03

105.77

269.68

Depreciation

60.18

71.10

142.42

163.09

169.03

Finance Costs

17.12

16.13

95.56

148.06

141.64

Other income

3.92

7.83

9.90

2.90

11.51

Exceptional items

(9.54)

(10.43)

29.19

172.11

17.01

PBT

169.03

194.36

(65.86)

(30.37)

(12.47)

Tax

54.95

66.49

1.04

0.00

1.66

Extraordinary Items

PAT (before Minority Interest and share of Associates)

114.08

127.87

(66.90)

(30.37)

(14.13)

EPS

26.35

29.54

(15.45)

(7.00)

(3.30)

P/E

21.97

29.08

Profitability Ratio

Particulars

2013

2014

2015

2016

2017

EBITDA Margin (%)

6.39%

6.42%

2.83%

2.05%

4.88%

Net Profit Margin (%)

2.89%

2.89%

-1.42%

-0.59%

-0.26%

Balance Sheet Figures

Particulars (In Rs. Cr.)

2013

2014

2015

2016

2017

Share Capital

43.29

43.29

43.29

43.29

43.29

Reserves & Surplus

1,099.26

1,206.88

1,118.77

1,118.01

1,058.97

Net worth

1,142.55

1,250.17

1,162.06

1,161.30

1,102.26

Non-Controlling Interest

0.00

0.00

0.00

0.00

0.00

Long Term Borrowings

258.27

741.76

952.20

925.57

692.79

Current liabilities

1,324.34

1,782.71

1,782.13

1,660.21

1,949.90

Other long term liabilities and provisions

79.57

259.80

271.48

186.17

135.60

Deferred tax liabilities

0.93

0.00

0.00

0.00

0.00

Total Liabilities

2805.66

4034.44

4167.87

3933.25

3880.55

 

Particulars (In Rs. Cr.)

2013

2014

2015

2016

2017

Fixed Assets

754.72

1,318.22

1,425.27

1,393.33

1,255.25

Noncurrent Investments

0.00

0.00

0.00

0.00

0.00

Current assets

1,806.17

2,397.39

2,469.92

2,278.58

2,411.20

Long term advances and other noncurrent assets

244.77

317.79

272.68

261.34

214.10

Deferred Tax Assets

0.00

1.04

0.00

0.00

0.00

Total assets

2,805.66

4,034.44

4,167.87

3,933.25

3,880.55

Efficiency Ratio

Particulars

2013

2014

2015

2016

2017

Return on Capital Employed

17.99%

14.27%

6.29%

5.07%

15.02%

Return on Equity

9.98%

10.23%

-5.76%

-2.62%

-1.28%

WHAT’S DRIVING THE STOCK

Strong Parentage

The Company has strong operating relation with its parent BASF SE. The parent company has always provided financial and technological support to BASF.

Diversified Business Profile

BASF derives revenue from four segments: agriculture, performance products, functional materials and solutions, and chemicals. Performance products and functional materials and solutions contributed an average of about 80% to revenue and 75% to EBITDA over FY 2014-FY 2017. BASF caters to customers from sectors such as agriculture, auto, construction, paints, plastics and paper, thus providing protection against volatility in any customer segment.

Dahej Plant | Important Investment

The Dahej plant is the biggest investment, ~Rs. 1,000 Cr. made by BASF in India. The strengthening of the production platform in India is part of BASF SE’s investment plans for the Asia-Pacific region.

The plant is located at Dahej Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR). With this new facility, BASF India plans to increase its competitiveness in the Indian market. BASF’s Dahej facility caters to the demand of fast-growing segments like personal care, adhesives, appliances, paper and coatings etc. The Dahej plant is divided into 4 key products: (1) Integrated Polyurethane (PU) Complex, (2) Surfactants, (3) Polymeric Dispersion and (4) Automotive Engine Coolants Fluid.

Substantial Capex to Reduce Reliance on Imports

The Company’s Dahej facility was developed and commenced to reduce Company’ reliance on imports by BASF India to cater to the domestic market (import of raw materials formed ~78% of total raw materials requirements in FY 2017).

The parent company also targets ~75% local production of the products it sells in Asia Pacific by 2020. Given that the petrochemicals capacities and feedstock availability are increasing in Asia, we could see significant decline in the overall raw material imports of BASF India going forward.

New Product Launches in Agrochemicals

The agrochemicals segment of the Company is set to undergo transformation as the Company plans to launch 13 products over the next 3 years, covering larger crops portfolio (Rice, Corn, Soya, Grapes & Apple) whereas earlier it was largely focusing on Soya crop. All these products will largely be manufactured locally. These new launches are likely to drive revenue growth and margins.

WHAT’s DRAGGING THE STOCK

Poor Financials

BASF India is loss making for the last 3 years. Although the Company has reported a net profit of Rs. 223.06 Cr. in FY 2018 on TTM basis.

Intense Competition in the Chemical Sector

Name

Last Price

Market Cap.

EPS

P/E

Pidilite Ind

1,085.75

55,135.51

17.08

63.57

UPL

745.05

37,947.86

40.00

18.63

Tata Chemicals

718.35

18,300.42

72.04

9.97

Aarti Ind

1,316.50

10,703.15

37.65

34.97

Solar Ind

1,051.00

9,510.50

24.51

42.88

Guj Flourochem

863

9,480.06

9.36

92.20

BASF

2,002.00

8,665.79

51.53

38.85

Himadri Special

149.1

6,238.46

4.82

30.93

Guj Alkali

757.65

5,563.95

54.61

13.87

Vinati Organics

898.35

4,616.71

25.79

34.83

Phillips Carbon

247

4,256.75

10.66

23.17

Low Liquidity | High Volatility

In one month period, on an average only 10,506 shares were traded.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.