Why did Alkyl Amines & Balaji Amines become successful multibagger stocks?

Discussion in 'Must-Read Interviews, Articles & News Items' started by Arjun, Nov 28, 2020.

  1. Arjun

    Arjun Chief Executive Officer (CEO) Staff Member

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    Saurabh Mukherjea and his Team Marcellus have explained in detail the reasons for the success of multibagger stocks Alkyl Amines & Balaji Amines.

    Alkyl Amines is a leading manufacturer of aliphatic amines - a key ingredient in the pharma and chemical industries. Over the last ten years (FY10-20), Alkyl has delivered earnings CAGR of 34% with an average pre-tax RoCE of 23% (these numbers look even better for the last 3 and 5 years).

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    It is pointed out that the key factors behind Alkyl’s success have been:

    (a) its R&D strengths led by its technocratic top management and well-established R&D team which has enabled Alkyl to develop ~100 SKUs, nearly 4x the closest peer, as well as undertake product innovations like Acetonitrile;

    (b) its unwavering focus on the core business resulting in timely deployment of new capacities and identification of new product opportunities; and

    (c) significant entry barriers in the aliphatic amines industry, such as high capital costs, alongside long lead times in obtaining government & customer approvals.

    The key success factors for Balaji Amines and Alkyl Amines have been nicely summarized.

    It is noted that Balaji Amines and Alkyl Amines now account for >90% market share of aliphatic amines and amine-based derivatives in India with Rashtriya Chemicals & Fertilisers, the third largest player, commanding only single digit market share.

    Consolidation of market shares in amines industry is not only prevalent in India but in most other countries too – for instance aliphatic amines market is dominated by handful of players like BASF, Arkema, Eastman Chemical and Huntsman in USA and Europe.

    It is also pointed out that the inherent nature of the industry lends significant advantages to incumbents over a new entrant

    One of the factors is that the significant initial capital investments and long lead time in obtaining environmental clearances from the Government and product approvals from customers present formidable challenges for new entrants.

    This places potential entrants at disadvantage versus the established incumbents such as Alky and Balaji which have been able to build scale and establish strong customer relationships over the years.

    It is also stated that there are four formidable barriers to entry into this sector.

    Click here to read the entire article
     
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