CMP = Rs 210
Price target: Rs 330
Key points:
- The stand-alone Q4FY2008 results of BASF India (BASF) are in line with the expectations. The net sales of the company grew by 20.3% yoy to Rs 193.4 crore, mainly driven by a strong 29.6% growth in the sales of agricultural products and a 20.2% growth in the sales of performance products. The plastic division’s sales also grew by a healthy 18.1%.
- The operating profit margin (OPM) during the quarter remained flat at 5.1% yoy. The margin for the performance product and chemical divisions improved while the same for the agricultural product and nutrition division, and the plastic division declined during the quarter. Consequently, the operating profit grew by 18.5% to Rs9.8 crore in Q4FY2008.
- Despite increased interest and depreciation charges, the company’s net profit increased by 20.2% to Rs4.4 crore during the quarter. For FY2008, the consolidated net sales grew by 24.5% to Rs 1,053.6 crore and the PAT grew by 14.8% to Rs 57.5 crore on the back of the solid performance by the agricultural product and nutrition division during the year.
- The consumption boom in the company’s user industries (white goods, home furnishings, paper, construction and automobiles) is expected to continue and hence we should remain optimistic about the company’s growth prospects.
- In my opinion, the stock is trading at attractive valuations of 6.9x FY2009E consolidated earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.9x.
- Hence I maintain Buy recommendation on the stock with a price target of Rs 330 over next 6 months.
