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Buy recommended as BASF heads north

Result Update Q2FY21: BASF India Ltd (BASF IN), CMP: 1664 Target: 1915

Buy recommended as BASF heads north
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Buy recommended as BASF heads north

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The following are the highlights of the company performance.

BASF India Ltd is the flagship company of BASF SE in India. BASF SE is a German multinational chemical company and one of the largest chemical producers in the world with presence in more than 80 countries.

• The company reported good set of numbers for the quarter under review revenue from operations improved by 15.5 per cent year-on-year to Rs 2,395 crores on a reported basis. The company reported healthy revenue growth mainly led by agricultural solutions, nutrition & care and petrochemicals & intermediates.

• On profitability front, the EBITDA from operations for the quarter improved by 107.3 per cent year-on-year at Rs 158 crore with an operating margin of 6.6 per cent. Net gain on exceptional item of Rs 423 crore was reported during the quarter, due to sale of construction chemicals business, divestiture of optical brightening agents business and impairment of certain assets at Dahej plant. The company achieved the reported PAT of Rs.411crore.

• Segment wise Agricultural solutions constituting 21.03 per cent of the revenue grew by 26.2 per cent YoY, Nutrition & Care constituting 25.72 per cent of the revenue grew by 66.1 per cent YoY, and Chemicals segment constituting 18.93% of the revenue grew by 42.2 per cent YoY.

• The company is achieving strong sales growth due to change in business model from agency to merchandise and expanding production capacity. Focus on margins, digitisation of cost savings and improved efficiency are reaping favourable results for the company.

• We continue to remain positive on BASF due to its business model, diversified products offerings, strong promoter group, improving balance sheet and benefits arising from the company's strong business reorganization (acquisition of BASF performance polyamides, divestiture of optical brightening agents and divestiture construction chemicals business).

• The Q2-FY21 results are above our expectations, we maintain our Buy rating on the stock with a revised target price of Rs.1,915 per share.

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