Balaji Amines gave 739% gain after Ashish Chugh assured that it would be re-rated
Ashish Chugh is probably one of the first discoverers of the potential of Balaji Amines.
As far back as in Jan 2011, Ashish recommended a buy of Balaji Amines with the confident assurance that the Company was headed for re-rating.
“This company caters to a wide range of industries starting from pharmaceutical to agrochemicals. It also caters to the chemical industry and FMCG in a small way. Almost all pharmaceutical companies whether Indian or international, the major international companies, are the customers of Balaji Amines,” he said in his typical soft-spoken voice.
He also made good his proposition by drawing attention to the fact that while the equity base of Balaji Amines is tiny, the sales and profits are growing at a ferocious pace.
The re-rating did happen sooner than Ashish Chugh expected. The stock spurted from Rs. 40 to Rs. 361, putting mind-boggling gains of 739% on the table.
Porinju Veliyath assured that Balaji Amines would give “more gains that Page Industries, Kitex Garments, Sun Pharma”
Porinju’s interview of March 2015 is a sore point for us because we studiously ignored all three stocks that he had recommended. Unfortunately for us, all three stocks have given multibagger gains and we missed out on a massive bonanza.
|Stock||Price on 20.03.2015 (Rs)||CMP (Rs)||Gains (%)|
Exalted companies lag behind with pathetic returns
It is interesting to note that Porinju’s assurance that these three little known stocks will give more gains than exalted companies like Page Industries, Kitex Garments and Sun Pharma has also come true.
While Page Industries has given a princely return of 1.5% since 20th March 2015, Kitex Garments has lost 22% in the same period.
Sun Pharma has fared even worse by losing 36% in the same period.
So, maybe Porinju’s advice that we should stop obsessing about so-called high-quality and high P/E stocks and instead buy a basket of so-called low-quality companies at dirt-cheap valuations has some merit after all.
Mohnish Pabrai muscles his way into Balaji Amines
Mohnish Pabrai is famous for his declaration that he does “not buy any stock which has less than 5x multibagger potential”.
Of course, this is not an empty boast but is backed by a stellar track record of hefty gains over a distinguished career of several decades.
Mohnish’s PMS fund called ‘The Pabrai Investment Fund IV LP’ is sitting pretty on 607,204 shares of Balaji Amines as of 31st March 2017.
|BALAJI AMINES LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs CR)||1,178|
|EPS – TTM||(Rs)||[*S]||25.89|
|LATEST DIVIDEND DATE||20 JUL 2017|
|BOOK VALUE / SHARE||(Rs)||[*S]||113.79|
[*C] Consolidated [*S] Standalone
|BALAJI AMINES LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||MAR 2017||MAR 2016||% CHG|
(Source: Business Standard)
Shyam Sekhar holds big chunk of Balaji Amines
Shyam Sekhar’s activities in the stock market cannot be ignored because he also has several mega multibaggers to his credit. He was spotted with 183,561 shares of Balaji Amines as of 31st March 2016. His family members collectively hold another lot of 208,000 shares as of that date.
The present holding of Shyam Sekhar and of his family members is not known.
Nigel D’Souza’s recommendation yielded 145% gain
Nigel D’Souza’s Mid-cap mania show deserves to be paid more attention given the number of multibagger stocks that he has unearthed.
We saw earlier that his analysis of Panama Perochem, a stock in which Dolly Khanna, Anil Kumar Goel, Madhukar Sheth and Chetan “Jeetay Investments” Parikh are sitting pretty, was brilliant. The stock shot up like a rocket soon after Nigel covered it.
The same thing has happened in Balaji Amines. After Nigel D’Souza put the spotlight on it, the stock has taken off and posted massive gains of 145% in just about 14 months.
— Nigel D'Souza (@Nigel__DSouza) March 28, 2017
Nirmal Bang recommends buy
Runjhun Jain of Nirmal Bang has expert knowledge of Balaji Amines. She understands all the nuances of the Company and of what makes it tick.
Balaji Amines reported so-so Q4FY17 results and this caused the stock to correct a bit.
However, Runjhun Jain has explained that the so-so results were caused by temporary factors and opined that the weakness in the stock is the golden opportunity to tuck into the stock. Her views are as follows:
Balaji Amines Limited (BAL), set up in 1988, is a leading manufacturer of Aliphatic Amines. It specialized in manufacturing Methylamines, Ethylamines and derivatives of them. It also operates a 5 start hotel in Solapur – Balaji Sarovar, the only 5 star property in the city.
The company posted decent sales growth of 16% for the quarter at Rs 193.1 cr despite high methanol prices (which impacts the volume) and Ethylamine plant shut down (for 20-25 days, was shut down after 3-4 years). Volume growth for FY17 was around 10-12% against our expectation of 20%. Methanol prices have remained on highed end throughout the year (and especially in Q4) which we believe has deferred the volume. However methanol prices have corrected since April and hence we expect some of the volumes to come back during the year. EBITDA margins improved to 21.3% in FY17 from 20.3% in FY16. Higher EBITDA and lower interest cost led to 40% jump in PAT to Rs 85.6 cr.
– The company has recently undertaken expansion for Morphaline and increased capacity from 3000 MT to 10000 MT with capex of Rs 25-30 cr, funded by internal accurals. The company is awaiting the environmental clearance soon for it before commencing the operations. Morphaline is mainly used in water and rubber treatment plants. Currently, there are only 3 players worldwide, including BAL, excluding Chinese players. India’s local demand is 600 ton/month out of which BAL is supplying Rs 200 ton/month. With the increased capacity the company would be able to substitute imports. Till now, imports of Morphaline used to enjoy anti-dumping duty however recently being removed, still management believes that without anti-dumping also, BAL would be competitive enough to garner market share from other players including Chinese manufacturers.
– Greentech – its loss making subsidiary has been merged with the company and all the operations have been stopped in it. This would help the parent company in claiming the tax benefits on Greentech’s acuumulated losses.
– The DMF has shown increased traction and the company said the product has started contributing marginally to the bottomline. The management remains confident of getting anti-dumping on it soon. As and when it happens, it will boost the company’s volumes and margins further as the company continues to incur fixed costs on it.
– The company is expecting environmental approval for Acetonenitrile by month end.
– Hotel business is continue to remain steady
Valuation & Recommendation
For FY17-19E we expect the company’s sales to grow by 16% and PAT by 24% (as interest cost is likely to come down and with no major capex lined up depreciation is likely to be stable at current levels). BAL is leading amine player and enjoys handsome market share in its basket of products. It is consistent dividend paying company. We maintain our positive outlook given the improvement in ROCE and ROE with positive free cash flow. We recommend BUY on the stock for price target of Rs 485 (12x FY19E).”
We have to ponder over Runjhun Jain’s advice seriously because if four illustrious investors have shown confidence in a stock, it obviously means that the stock has the potential to deliver multibagger gains in the near future. We shouldn’t be caught in the sorry position of having missed out on yet another bonanza!