BASF: Expansion to accelerate revenue growth, buy - IndiaNivesh

- Diversified revenue mix - BASF's diversified product mix and strong presence in speciality chemicals increases revenue outlook. Additionally, new product launch, innovative marketing strategy and penetration into newer geographies are key drivers for business.

- Greenfield/Brownfield expansion to accelerate revenue growth - New facility at Dahej, Gujarat with investment of Rs.10bn and facility expansion at Mangalore and Ankleshwar will create competitive advantages and facilitate faster growth.

- Sound Liquidity Position - Strong Interest/OCF of 24.9x, illustrate its operations are very well placed to pay interest cost. Further, in case of any emergency parent is likely to allow extension in ECB tenure (raised for new facility expansion).

- Restructuring to boost ROE - The consolidation of 3 entities (BCCIPL, BCIN, BPIL) into one will not only strengthen product portfolio but also bring expansion in margin and ROE.

Valuations: BASF's strong product portfolio, new facility and product innovation should augur well on revenue growth. The recent cost rationalisation could help BASF to expand its margins going-ahead. Maintain BUY with target price of Rs.779 (valuing 20x FY14E earnings).

Source : Equity Bulls

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