BASF INDIA LTD

Date Published: March 04, 2024

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Company Overview:


BASF India Ltd., located in Mumbai, is a part of the BASF Group, which has over 111,000 employees worldwide. The company focuses on combining economic success with environmental protection and social responsibility. BASF India has been contributing to India's progress for over 130 years. In 2022, BASF India generated sales of around €2.7 billion. The company's portfolio includes six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care, and Agricultural Solutions. BASF aims to differentiate its businesses from competitors and establish a high-performance organization to succeed in a competitive market environment. The company's divisions are responsible for strategic and operational tasks and are organized according to sectors or products. BASF India serves as a local representative of the BASF Group and supports the growth of business units with proximity to customers. The company's portfolio ranges from chemicals and materials to industrial solutions, surface technologies, nutrition & care, and agricultural solutions.

Technical View: BASF INDIA LTD.

basf chart


Technical View: BASF has broken above its Pattern Resistance with strong volume on 15th December, 2023 and made fresh high of 3198 on 28th Dec,2023. BASF is consolidating now in range of 2950-3100 as an immediate resistance and 2850 as an immediate support. We suggest to buy at current price and add dips if falls near our support zone of 2930-2850 and hold for strong momentum for price target of 3400-3900.

Key earnings highlights:

    Q3 2023: BASF’s EBIT before special items of €575 million is in line with estimates.

    • In Q3 2023, sales declined by 28.3% to €15.7 billion, mainly due to lower prices and volumes.
    • BASF’s volumes declined considerably compared with Q3 2022 across almost all customer industries
    • In Q3 2023, volumes declined by 3% compared with Q2 2023
    • Earnings in the Agricultural Solutions and Surface Technologies segments increased compared with Q3 2022
    • Overall, EBIT before special items declined by €772 million compared with Q3 2022 and amounted to €575 million, in line with average analyst estimates of €601 million

Q3 2023: Earnings in Agricultural Solutions and Surface Technologies increased; remaining segments recorded a decline versus PYQ

Strong cash flow generation in Q3 2023

  • Cash flows from operating activities improved by €384 million to €2.7 billion
  • Increased focus on reducing inventory levels pays off; changes in net working capital led to a cash inflow of €1.9 billion
  • Payments made for property, plant and equipment and intangible assets rose by €215 million to €1.2 billion
  • Free cash flow increased by €170 million to €1.5 billion

Strong balance sheet

  • Total assets decreased by €1.9 billion to €82.6 billion
  • Net debt amounted to €18.9 billion – an increase compared with year-end 2022 but a decrease compared with June 30, 2023
  • Equity ratio: 48.8% (Dec. 31, 2022: 48.4%)
  • BASF has good credit ratings1, especially compared with competitors

Delivering strategic transformation of organization and businesses

    • Company have embedded all business-critical services in the operating divisions.
    • Company embedded customer-focused R&D in the operating divisions.
    • Company streamlined business services, digitalization and R&D at the company level.
    • BASF is ready to go a step further and manage businesses in a more differentiated manner that also reflects changes in the global chemical market.

Increased focus on capex efficiency: Capex will be reduced by ~€4.0 billion in the period from 2023 to 2027

    • Capex budget of €28.8 billion for 2023 to 2027 originally communicated in February 2023 will be reduced to €24.8 billion.
    • In 2023, capex will be reduced by ~€1.0 billion – from €6.3 billion to €5.3 billion.
    • Capex for 2024 to 2027 will be reduced by ~€3.0 billion.
    • In February 2024, company will present the new capex budget for the planning period from 2024 to 2028.

Analyst Conference Call Q3 2023

    BASF’s Verbund site project in Zhanjiang is well on track.

    • Project execution on time and in budget:
    • Second downstream plant (TPU) successfully started up in September 2023.
    • Construction activities stepped up, with currently more than 15,000 construction workers on site every day.
    • Stringent project execution; favorable sourcing environment in China is leveraged

Attractive financing conditions in China

  • We are financing the Zhanjiang Verbund site with a combination of equity (20%) and debt (80%).
  • Equity funded by dividends from existing BASF Group companies in China.
  • Debt financing will be based on the Chinese capital market and local bank financing.

Wintershall Dea is the major divestiture that remains to be completed.

  • BASF stands by its strategic goal of selling its 72.7% share in Wintershall Dea and continues to evaluate monetization options.
  • Wintershall Dea is currently in the process of legally separating its Russia-related business; the separation is planned to be completed by mid-2024.
  • Federal investment guarantees in place for Russian assets
  • For the business year 2022, BASF received ~€290 million as common dividend from Wintershall Dea.
  • Wintershall Dea is adjusting its company structure:
    • Annual cost savings of €200 million planned.
    • Management board reduced from five to three members
    • Reduction of around 500 jobs company-wide expected.

Our View:

Looking at strategic goal of selling stake in wintershall dea, BASF will have room for further capex expansion. Going ahead looking at Forward EPS estimate for F.Y 2024-25 and F.Y 2025-26 of 122.70 & 135.70 as compared to current EPS of 81.97 for F.Y 2023-24. We suggest to Buy and hold BASF for price target of 3900 as long as levels of 2700 is intact as strong support levels.

 
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