Andhra Petrochemicals Ltd

(BSE: 500012)

CMP : 89.65 Buy

Nifty 10.453 Investment Summary
Sensex 34,780
· Capacity Expansion
Nifty PE 25.19
Sensex PE 22.31 Andhra Petrochemicals is the only Oxo-Alcohol producer in India, it underwent a capacity
expansion from 30,000 MTPA to 73,000 MPTA marking a 150% capacity expansion. As
Andhra Petrochemicals enjoys a Monopoly despite such huge capacity expansion, it has
Stock Data been able to operate at 100% Capacity utilization levels
Sector Comm Chemicals
· Depriciating Rupee and Anti-Dumping duty
BSE Code 500012
Face Value (INR) 10 India imports a significant proportion of its Oxo-Alcohols demand, because of Anti-
Market Cap (INR Cr.) 761.77 Dumping duties placed by government of India and in a depreciating rupee environment
Market Cap (US$ Mn) 103.42 the imports have become costlier which translates into increased demand for the
Equity Share Cap. 85 Cr. products of Andhra Petrochemicals yielding them a better pricing power despite increase
in Crude Oil Prices

52-week high/low Rs.90.40 / 36 · Procurement Stability

Propylene is the key raw material for the production of the Oxo-Alcohols Industry. In
Stock Performance (%) India the sole producer for propylene is HPCLVisakha refinery, in past the procurement of
1M 6M 12M propylene has been unstable. Currently, Andhara petro has reached an agreement with
Absolute (%) 17.11 43.67 134.99 HPCL for the procurement of Propylene which shall ensure production stability and
efficiency at Andhra Petrochemicals
Shareholding Pattern (%) · Valuation & View
Andhra Petrochemicals valuations look compelling from a fixed assets as well as current
assets perspective.The investment in this company is more of a play on possible capacity
expansion, pricing power and status of Crude oil prices and USD-INR rate apart from the
optimum execution cycle

The ability of Andhra Petro to efficiently manage its production and procurement, crude
prices and exchange rate will be the key sensitives to our valuation

Financials :
INR Mn. Q1FY19 Q1FY18 QoQ(%) Q1FY18 YoY(%)
Sensex & Stock Movement Total Income 1652.1 1137.6 45.23% 1292.8 -99.97%
Operationg Profit 394.9 114.2 245.80% 67.6 -96.36%
PAT 314.7 56.4 457.98% 6.2 -26.13%
EPS 3.7 0.7 428.57% 0.1 4186.71%

In Q1FY19, Andhra Petrochemicals grew to Rs. 1652.1 Mn. (Up 45.23% YoY), Operating
profit reported was Rs. 394.9 Mn against profit of Rs 56.4 Mn in Q4FY18 (Up 245% YoY),
while the net profit grewY-o-Y to Rs. 314.7 mn(Up 428.5%YoY)

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 Andhra Petrochemicals Ltd
(BSE: 500012)

CMP : 89.65 Buy

5 Year Financials :
INR Cr. FY18 FY17 FY16 FY15 FY14
Total Income 5206 3310 3354 1414 2644
EBITDA 686 149 -100 -288 -104
PBT 473 -109 -263 -475 -302
PAT 465 -74 -237 -445 -257
EPS 5.5 -0.9 -2.8 -5.2 -3.0
Equity Capital 850 850 850 850 850
Reserves 727 285 324 586 1052
Networth 1577 1135 1173 1435 1902

Ratios (In %)
Particulars FY18 FY17 FY16 FY15 FY14

EBITDA Margins% 12.9 4.0 -2.7 -18.3 -3.6

PAT Margins% 8.7 -2.0 -6.3 -28.2 -8.8

ROA (%) 18.2 -2.9 -9.3 -16.0 -8.2

ROE (%) 34.3 -6.4 -18.2 -26.7 -12.6

Debt/Equity 0.5 1.0 0.8 0.5 0.3

BVPS 18.6 13.4 13.8 16.9 22.4

Dividend Yield (%) - - - - -

MCAP/Sales 0.9 0.7 0.3 0.7 0.3

MCAP/PAT 10.5 -29.4 -4.0 -2.2 -3.1

P/BV 3.1 1.9 0.8 0.7 0.4

P/E 10.5 -29.4 -4.0 -2.2 -3.1

· During the Financial Year 2017-18, the Plant produced 76,257 MTs total Alcohols
compared to previous year 60,021 MTs (27% YoY growth) which works out to
104.4% (approx.) capacity utilization. Sales during the year were 78,049 MTs
compared to previous year 58,254 MTs (34% YoY growth). Company posted a Net
Profit of Rs.44.19 crores during the Financial Year 2017-18 as compared to Net Loss
of Rs.3.86 crores incurred during the previous year.

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 Andhra Petrochemicals Ltd
(BSE: 500012)

CMP : 89.65 Buy

Company Overview
· The Andhra Petrochemicals Ltd. (APL) was promoted by The Andhra Pradesh Industrial Development Corporation
(APIDC) and The Andhra Sugars Ltd (ASL) in 1984 as joint sector Company. Subsequently the structure of the Company has
changed into an assisted sector Company with ASL being the major share holder.
· APL is the only producer of oxo-alcohols in India.The company's product portfolio comprises of :-
1) 2-ethyl Hexanol
It's products are used in PVC industries such as cables, footwear, sheets and films. It is also applied in the production of 2- ethyl
hexyl acrylate, which finds application in emulsion paints, adhesives, surface coating, paper and textile processing.
2) N-Butanol
It is applied in the manufacturing of solvents, adhesives, detergents, plasticizers and acrylates.Apart from these, N-Butanol is
also used in rubber chemicals, printing inks, resins, pharmaceuticals, urethane catalysts, dyes, varnishes, adhesives, nitro
cellulose lacquers and pesticides, among others.
3) I-Butanol
It finds application in manufacturing plasticizers, amino resin, isobutyl acetate and solvents
· M/s APL was established with a capacity to produce 30,000 MTPA of Oxo Alcohols at Visakhapatnam, Andhra Pradesh. The
Plant has recently undergone an Optimization & Modernization Scheme to increase the capacity to 73,000 MTPA.The Plant
employs the latest State of Art of Technology from M/s Davy Process Technology, London, U.K., with total capital investment of
around Rs. 4970 million.The Company commenced Commercial Production in February 1994 and after the Modernization
on 1st May, 2010.
Industry Overview and Opportunities:
§ The Indian Oxo-Alcohols Industry is estimated to generate an annual demand of 2,20,000 MPTA. The industry is currently
growing at a rate of approx. 9% CAGR (the existing capacity of Andhra Petrochemicals at 80,000 MPTA running at full capacity
utilization).
§ With the government putting the Anti-Dumping duties in place and in the current depreciating rupee environment the import
of Oxo-Akcohols is proving to be economically unviable for the consumers and hence, the Indian players have an upper hand
and with Andhra Petrochemicals being one of the largest players is set to benefit the most.
§ As the imports become costlier the demand of products of Andhra Petrochemicals has increased and hence, the company is
enjoying better price realizations than in the past despite the rise in the crude oil prices.
§ The key raw material for the industry is Propylene, with only single source in India wiz. HPCL Visakha refinery, the industry
faces a constant constraint of procurement of Propylene. But,Andhra petro has been able to reach an agreement with HPCL
for the stable procurement of propylene which ensures production stability by Andhra Petrochemicals
Valuations:
1. Andhra Petrochemicals is the only Oxo-Alcohols producer in India marking a Monopoly for the company catering to 36% of
nation's demand
2. The firm underwent a capacity expansion by almost 150% recently, yet it is operating at full capacity utilization due to its
monopoly in the market. Also as the government of India has put in Anti-Dumping duties against some countries and rupee
continues to depreciate importing Oxo-Alcohols has become costlier for the consumers which leads to increased demand
for Andhra Petrochemicals products and in turn yields them a better price realization despite increasing crude oil prices

AT CMP of Rs. 89.65, the stock is trading at PE of 10.57x on its EPS (TTM) of Rs. 8.48.The stock is available at a discount if we
compare it with S&P BSE 250 SmallCap (PE 53.76x) & Nifty Smallcap 250 (PE 63.63x). Considering company's monopoly and
current plunge in rupee and anti dumping duties imposed by Government of India provides a conducive environment for
Andhra Petrochemicals to grow at a rapid scale

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 Andhra Petrochemicals Ltd
(BSE: 500012)

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