21 June 2024 Punjab Khabarnama : AACL 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, from 0.43% of revenue in FY19 to 0.65% in FY24 (INR93m), to strengthen its leadership in amines. The total R&D expenditure has increased at a CAGR of 20% in the past 5 years. AACL has expanded its ethylamine capacity by 35ktpa (~18% of the total capacity) in Kurkumbh, Maharashtra, with a capex of INR4b 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, AACL has applied for anti-dumping duty (ADD). In order to beat competition, AACL is working to enhance product quality and production efficiencies. AACL increased its aliphatic amines capacity by ~30% in FY24 to ~200ktpa and is introducing new specialty products to enhance margin amid demand challenges.
Outlook
We estimate a ~22% revenue CAGR and a 40% EPS CAGR during FY24-26. Downside risks to our estimates stem from rising competition and raw material price fluctuations. The stock trades at 36.9x FY26E EPS and 24x FY26E EV/EBITDA. We maintain a Neutral rating with a TP of INR2,010.