BASF India –Hold- Sharekhan

BASF India’s stand-alone Q1FY2011 net profit came in at Rs48.9 crore, up 19% year-on-year (y-o-y). However the results are not strictly comparable due to consolidation of the financials of Ciba India.

The net sales for the quarter were up by 72.7% y-o-y to Rs659.84 crore, driven by a 1.6x year-on-year (y-o-y) rise in the revenue from the performance products business. The robust growth in the performance products business was largely due to the merger with Ciba India. The plastic division also logged in a good show with the revenue up by 60% y-o-y.

The operating profit grew at a slower pace than the top line, expanding by15.6% y-o-y to Rs79 crore in the quarter, due to around 590-basis-point contraction in the operating profit margin (OPM) to 12%. The OPM contraction was as a result of the amalgamation with Ciba India, which has lower margins than BASF India, as well as decline in the margins for the agricultural solutions business.

The interest charges remained largely flat on a y-o-y basis whereas the depreciation charges witnessed an uptick to Rs8.94 crore in the quarter as compared to Rs6.87 crore in the same quarter of the last year.

BASF India has reported a strong set of numbers for Q1FY2011 on the back of a healthy traction in demand across all its businesses. The OPM, however, witnessed some pressure as a result of the amalgamation of Ciba India with itself and lower margins for the agricultural solutions business. We have tweaked our earnings estimates for FY2011 and FY2012 to factor in the Q1FY2011 performance and our revised earnings per share (EPS) now stands at Rs31.7 for FY2011 and Rs41.8 for FY2012.

At the current market price of Rs460, the stock trade at 11x its FY12E EPS and 2.9x FY12E book value (BV). We maintain our HOLD recommendation on the stock with a revised price target of Rs501.

Popularity: 2% [?]

Tags: BASF India, Free Share Tips, Sharekhan

Category: Broker tips