Buy BASF India; target of Rs 1915: Anand Rathi

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Anand Rathi's research report on BASF India

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 producer 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% year-onyear to ₹2395 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% year-on-year at ₹158 crores with an operating margin of 6.6%. Net gain on exceptional item of ₹423 crores 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 ₹411 crores. Segment wise Agricultural solutions constituting 21.03% of the revenue grew by 26.2% YoY, Nutrition & Care constituting 25.72% of the revenue grew by 66.1% YoY, and Chemicals segment constituting 18.93% of the revenue grew by 42.2% YoY.  BASF is achieving strong sales growth due to change in business model from agency to merchandise & expanding production capacity. Focus on margins, digitisation of cost savings & 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 & divestiture construction chemicals business).

Outlook

The Q2-FY21 results are above our expectations, we maintain our BUY rating on the stock with a revised target price of ₹1915 per share.

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