HDFC Securities expects better performance of Balaji Amines (BLA) due to robust demand from pharma and agrochemical industry that comprises 77% of its revenue mix; ramp-up in BSCL's production; doubling of methylamines by FY24; capacity addition of acetonitrile and taking up the capacity to 25.5ktpa by FY23; and  production linked incentive scheme that provides the right tailwinds for long-term volume growth. Q1 EBITDA/APAT were 17/22% above our estimates, owing to lower-than- anticipated raw material cost, lower-than-expected other expenses, lower-than- expected finance cost, and lower-than-expected tax outgo.

Volumes, realisations and margins: Total sales volume was 22kt (+20/-12% YoY/QoQ). The tabulated per-kg realisation from the amines segment comes to INR 177 (+54/20% YoY/QoQ). Back calculated per-kg EBITDA improved by 86/18% YoY/QoQ to INR 52. EBITDA margin remained healthy at 29.2% (+493/-17bps YoY/QoQ) on the back of a better product mix, higher price realisations across most of the products, and increase in operating leverage due to surge in volume offtake.

Con call takeaways: (1) The new plant of ethylamines at Solapur has achieved capacity utilisation of over 90% in Q1FY22 itself. This plant has led to a lower cost of production due to a new technology adopted by the company. (2) The construction of a di-methyl carbonate (DMC) plant is ongoing, and BLA expects it to commence operations by the end of FY22. (3) Capex of INR ~0.7- 0.8bn has been planned to set up an additional acetonitrile plant having capacity of 50 tonnes per day at the 90-acre greenfield project (Unit IV). This plant will get commissioned in FY23. (4) BSCL recorded 1,500 tons of average production per month in Q1. Non-agrochemical clients constituted about 40% of total sales of ethylenediamine (EDA) in Q1, up from about 10% in earlier quarters.