Recommendation from Chemicals Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon [EasyDNNnews:PaidContentStart]

Bhansali Engineering Polymers Ltd : CATALYST TO YOUR PORTFOLIO

HERE IS WHY
✓  Low-cost, backward-integrated ABS producer
✓  Higher-value specialty polymer portfolio
✓  Strong Q1 FY27 earnings momentum

I ndia’s Acrylonitrile Butadiene Styrene (ABS) and engineering thermoplastics market serves auto, appliance, electronics, healthcare and other goods makers. ABS offers strength, easy processing and good finish, while Styrene Acrylonitrile (SAN) adds rigidity and heat resistance. Entry barriers are high as suppliers need process skills, quality, custom grades and long approval cycles. Bhansali Engineering Polymers Limited (BEPL) is an established ABS and SAN maker and low-cost producer. It has plants at Satnoor in Madhya Pradesh and Abu Road in Rajasthan. Its JV with Japan’s Nippon A&L gives access to technology and specialty skills.

The company is backward integrated, with Satnoor making High Rubber Graft (HRG), a key input, while Abu Road makes SAN and finished ABS resins. SAN capacity is 52,000 metric tonnes per annum (MTPA) and is used in-house, while ABS capacity is 75,000 MTPA. It sells injection, extrusion and blowmoulding grades and has over 80 ABS and specialty variants. Its mix is shifting to higher-value Polycarbonate-ABS (PC-ABS), flame-retardant grades and custom colours.

The sector view remains positive, supported by automobile production, premiumisation in consumer durables, rising appliance penetration and increasing use of lightweight engineering plastics. Electric vehicles can lift demand for plastics in interiors, trims and battery parts. Import substitution is another opportunity, as BEPL says imports meet 30–40 per cent of Indian ABS demand, giving BEPL an opportunity to capture domestic share, boost production, gain higher-value sales and improve profitability as expanded capacity ramps up.

Growth can come from added capacity and a better mix. BEPL is spending about ₹200 crore to raise ABS capacity from 75,000 MTPA to 1,00,000 MTPA, with commissioning targeted by September 2026 and optimal use expected by the end of FY2028. The project is funded internally. Its R&D work made 17 new grades, improved 12 and commercialised 20 products. Projects include Acrylonitrile Styrene Acrylate (ASA) for autos, non-halogenated flame-retardant PC-ABS for electronics and recycled PC-ABS blends. Its colour range exceeds 1,500 shades and uses Nippon ABS & Latex technology.

Key risks come from raw-material dependence and industry cyclicality. More than 85 per cent of key raw materials, mainly Styrene and Acrylonitrile monomers, are import dependent, exposing margins to crude-oil-linked chemical prices and currency movements. Rapid declines in international monomer prices can also create inventory losses. Competition from imported ABS remains another risk, particularly when Asian producers operate with surplus capacity.

Q1 FY27 was strong. Revenue rose 53.3 per cent year-on-year to ₹472.2 crore. EBITDA rose 44.5 per cent to ₹92.3 crore, though margin eased to 19.2 per cent from 20 per cent. PBT rose 46.3 per cent to ₹90.7 crore and PAT grew 42.9 per cent to ₹65.6 crore. PAT margin was 13.6 per cent versus 14.4 per cent. Gross debt-to-equity stayed at zero. The Board also declared a first interim Dividend of Re 1 per share for FY27, involving about ₹24.9 crore.

At a P/E ratio of 15.3 times, the stock trades below the industry P/E of 16 times. A PEG ratio of 1.59 points to a fair, rather than cheap, valuation. The debt-free balance sheet, healthy margins, capacity expansion and specialty push offer support. A dividend yield of 3.25 per cent and a 10-year record of steady dividends add comfort. Higher capacity, import substitution and specialty products can aid earnings, while raw-material swings, imports and execution remain key risks. Keeping these factors in mind, we recommend BUY.

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