Alkyl Amines Chemicals

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Alkyl Amines Chemicals Limited is a global supplier of amines and amine-based chemicals to the pharmaceutical, agrochemical, rubber chemical & water treatment industries, among others. Amines are most close relatives to ammonia (NH3). In fact, the word amine comes from the am- of ammonia. Amines are one of the smelliest families of organic molecules. Amines play a very significant role in the survival of life as they are involved in creating amino acids. Amino acids are the building blocks of proteins in human beings. Many vitamins are also made from amino acids.
 

Investment rationale
 

The robust product portfolio of 100+ products mostly developed in house: Alkyle Amines is global manufacturers and suppliers of amines, amine derivatives, and other specialty chemicals. Products have applications in important industries like pharmaceuticals, agrochemicals, water treatment chemicals, rubber chemicals etc. The company has developed over 100 products for categories like Monoamines, Amides, Polyamines, Amine Hydrochlorides, and other specialty products. These products find applications in Pharma, Agro, Dyes, Rubber chemicals, Surfactants, Foundry chemicals, Speciality chemicals, Petroleum and petrochemicals, Paints & Polymers etc. The company is a global leader in Ethyl amines and one of the leading players globally in DEHA (Diethyl hydroxylamine. The company has an R&D center at Hadapsar, Pune. Over the last decade, the company had added various new production processes that were developed in the R&D to expand its product range through in house technology. 

 

An experienced player backed by robust infrastructure: Company is in the business of manufacturing and marketing various aliphatic amines, amine derivatives, and other specialty chemicals for the last 30 years. It has three manufacturing sites with 12 production plants and related utilities at Patalganga and Kurkumbh in Maharashtra and Dahej in Gujarat. The company commissioned the first plant in 1982 at Patalganga to make ethylamines with technology from Leonard Process Company, USA. Subsequently, the capacity at the site was expanded to manufacture other amines with the technical know-how of Acid Amines Technologies, USA, and now hosts 2 multipurpose amines plants with a capacity exceeding 25000 MT/annum. In 1995 it started on its Kurkumbh complex where various amines and amine derivatives are currently being manufactured in 9 production plants with a capacity exceeding 70000 MT/annum. In 2018 it started on its Dahej site where amines are currently being manufactured in 1 production plant with a capacity exceeding 35000 MT/annum. 

 

Accommodative industry, growth prospects look bright: Indian chemical industry ranks the third-largest in Asia and sixth in the world by output covering more than 70,000 commercial products. Indian Companies are witnessing higher inquiries from MNCs to aid their innovation and research. Domestic Companies (sensing these opportunities) are incurring capex to cater to upcoming higher demand. With decades of experience in handling and manufacturing of complex molecules/chemistry, Indian players are well equipped to capture these opportunities. 

 

No significant impact of Covid-19 led lockdown: Alkyle Amines has registered a robust growth with healthy operating margins despite lockdown. While sales remained muted with 1% decline, net profit jumped 160% due to massive improvement in margins led by 19% YoY decline in raw material prices. Management is confident of improving demand in the pharmaceutical industry, the biggest business driver. 

 

Strong financials: Company has a near debt-free balance sheet. Alkyle Amines enjoys one of the best EBITDA margins in the industry with over 300 bps improvement in the last three years. Return ratios viz RoE and RoCE are at 25% and 28% respectively. The quarterly financial numbers are growing at a decent pace. At the current price, the stock is trading 21x of its FY20 consolidated earnings.
 

Duration of recommendation: Short to Medium term.