Key Insights:

  1. Alkyl continues to report strong growth; 1HFY20 revenue/EBITDA/PAT increased 26%/36%/99% YoY.
  2. Gross margins improved 3ppt YoY to 51.1% led by higher realizations for Acetonitrile and better product mix.
  3. Healthy cash generation led to debt reduction; net debt-equity improved to 0.2x.

Views: Capacity addition (debottlenecking existing/fresh additions) amid demand uptick and improving product mix (higher share of derivatives) should drive significant earnings growth in the next 3 years.

Current valuations (16x TTM earnings) are reasonable given favourable industry dynamics (duopolistic industry, huge import substitution and high fixed costs), healthy 25% pre-tax RoCE (FY19) and strong cash conversion (113% 1HFY20 CFO-EBITDA) to fund future capex.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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