BASF India Jumps Most In Over 2 Years After Emkay Rates New ‘Buy’
Emkay Global initiated coverage on BASF India Ltd. with a 'Buy' rating, backed by a ramp-up in its new capacity utilisation, consolidation of niche business, and settlement of technical issues.
Shares of the company rose over 10 percent, the most since April 2015, to Rs 1,622 apiece.
Emkay anticipates a rise in the chemicals maker's revenue and profitability over the next three years, led by product launches and localisation of products.
BASF India's key Dahej plant is expected to spur revenue growth due to substantial capital expenditure on it, and its development into a chemical complex to reduce imports of intermediate products, the brokerage said.
The agrochemicals segment of the company is set to undergo transformation due to 13 product launches. Further, localisation of products in constructions, coatings, plastics and care segments are likely to boost high-margin manufacturing revenue and reduce dependence on low-margin trading business.
Emkay noted that BASF India is poised to demonstrate strong recovery in its net profit, estimated at Rs 400 crore in financial year 2019-20 from a net loss of Rs 14.1 crore in financial year 2016-17.
Emkay Estimates:
- Return on capital employed to rise to 20 percent in FY20 from 4 percent in FY17
- Revenue to grow at compounded annual growth rate of 14 percent over FY17-FY20
- Earnings before interest, tax, depreciation and amortisation to increase to 39 percent CAGR over FY17-FY20
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