Alkyl Amines shares: Fundamental, technical analysts divided on the stock; details here

Brokerage firms have a mixed views on Alkyl Amines Chemicals Ltd (AACL), where fundamental experts see up to a 20 per cent correction in the stock, while technical analysts are expecting the stock to gain momentum on the basis of strong technical parameters in the near term.

 

Analysts tracking the stock said that Alkyl Amines is navigating a challenging landscape marked by domestic capacity additions and aggressive dumping by Chinese manufacturers. Despite robust demand from the pharmaceutical sector in FY24, volume growth is projected to remain muted, in the single digits with product prices likely to increase alongside raw material costs.

 

An anti-dumping investigation into acetonitrile imports from China, Russia, and Taiwan is likely on the cards, they said. Alkyl Amines is bolstering its R&D efforts, expanding ethylamine capacity, and diversifying its product portfolio to enhance margins amid market pressures, but fail to boost morale at large. Technical analysts, however, remain cautiously optimistic.

 

Capacity addition in methylamines and its derivatives by domestic players and continued aggressive dumping by Chinese manufacturers in ethyl amines shall limit volume growth and expansion in margins. Demand in the domestic market, particularly from pharmaceuticals, was encouraging in FY24, said HDFC Securities in its note.

 

Volume growth to remain below 10 per cent YoY while product prices could increase in line with raw material prices. Investigation of anti-dumping concerning imports of acetonitrile originating from China, Russia, and Taiwan has been initiated. Softening in power and fuel costs and operating leverage will help increase the EBITDA margin, HDFC Securities said.

 

"We expect EBITDA and adjusted PAT to grow at a CAGR of 19 per cent and 21 per cent, respectively over FY24-27E and RoE and RoCE to improve from 12.2 per cent and 15.7 per cent  in FY24 to 11.4 per cent and 14.8 per cent  in FY27. Currently, the stock is trading at 55 times EPS FY25. We maintain 'sell' on Alkyl Amines with a price target of Rs 1,756," it added.

 

Shares of Alkyl Amines Chemicals were trading mostly flat at Rs 2,110 on Friday, with a market capitalization close to Rs 11,000 crore. The scrip had settled at Rs 2,105 in the previous trading session. Despite a 540 per cent rally in the last five years, the stock is down 22 per cent in 2022 so far.

 

Alkyl Amines focuses on product innovation, waste reduction, and environmental impact, with plans to triple its R&D team and implement a new by-product isolation process in FY25. The company has increased R&D expenses to strengthen its leadership in amines. The total R&D expenditure has increased at a CAGR of 20 per cent in the past 5 years, said Motilal Oswal.

 

"Alkyl has expanded its ethylamine capacity by 35ktpa in Kurkumbh, Maharashtra, with a capex of Rs 400 crore and repurposed the old plant to boost methylamine capacity. It aims to diversify its product portfolio as well. There has been pricing pressure amid increased acetonitrile imports from China and, hence, it has applied for anti-dumping duty," it added.

 

Alkyl Amines is working to enhance product quality and production efficiencies. AACL increased its aliphatic amines capacity by 30 per cent in FY24 to about 200 ktpa and is introducing new specialty products to enhance margin amid demand challenges, Motilal added with a 'neutral' rating and a target price of Rs 2,010. "Fluctuations in raw material prices are the key risk," it said.

 

However, technical analysts are positive on the counter. After a decent corrective move, Alkyl Amines has confirmed a double bottom formation around Rs 1,800 mark, said Mehul Kothari from Anand Rathi Shares & Stock Brokers in a report. Most of the chemical stocks were in consolidation mode for quite some time, he said.

 

"In today’s session, the stock confirmed a breakout from a falling trend line with volumes. Thus, we advise traders to buy the stock in the range of Rs 2,110 – 2,090 with a stop loss of Rs 2,000 for upside target of Rs 2,300," the report added.

 

 

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