Recommendation: Buy
Target Price: Rs 750
ACIL is a leading Specialty Marine Chemical manufacturer in India, mainly focused on bromine. ACIL substantially augmented its bromine capacity from 10ktpa to 28.5ktpa by end of FY21, and is on track to add further 14ktpa to the same while also expanding its industrial salt production capacity. Besides, the company is embarking into bromine-derivative performance products within next two years, with an investment of Rs2.5 billion.
Leading position in bromine and industrial salt
ACIL is the largest exporter of bromine and industrial salt from India. The company’s strong market position is due to factors such as its relationship with global customers, established infrastructure and access to brine reserves at the Rann of Kutch. ACIL is a member signatory to ‘Responsible CARE’ under Indian Chemical Council.
Foray into bromine derivatives
ACIL has already established a strong footprint in bromine and is in the midst of adding further bromine capacity (from 28.5Kt to 42.5Ktpa) — to support the next leg of growth. ACIL plans to enter into bromine derivative performance products, including brominated flame retardants (capacity: 10ktpa), clear brine fluids (13ktpa) and bromine catalysts used for the synthesis of pure terephthalic acid (5ktpa) — by Q4FY24. Total capex envisaged for these derivatives is Rs2.5 billion.
Earnings to grow further, despite high base
Earnings from base businesses of industrial salt and bromine would be supported by volumes inching up through incremental capacities. Bromine derivatives is an FY25 story, as the commissioning would take place only by H2FY24. Based on the aforementioned drivers, analysts at IIFL Securities have built 29%/26% CAGR revenue/EBITDA CAGR over FY23-25. Additionally, there would be significant reduction in finance cost in the upcoming quarters. Thus, analysts at IIFL Securities expect healthy profitability, with an EPS CAGR of 32% over FY23-25.
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