IPO Note - Ami organics Limited By Angel One
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Ami organics was incorporated in 2004, Company is one of the leading Research & Development driven company. Ami organics deal in different types of Advanced Pharmaceutical Intermediates and Active Pharmaceutical Ingredients (API) and materials for agrochemical and fine chemicals. Ami Organics has 3 manufacturing facilities situated in Gujarat with an aggregate installed capacity of 6060 Mtpa
Positives: (a) Ami Organics is having high market share in key APIs like Dolutegravir, Nintedanib, and Trazodone. (b). Company has a diversified business, company has developed and commercialized 450 pharma intermediates for API across 17 Key therapeutic area. (c). Companies has recently completed an acquisition of 2 additional manufacturing capacity from GOL. (d). More than half of revenue comes from Export, Ami organics export to Italy, Finland, China and other countries.
Investment concerns: (a) In some of the API company already having market share of 70-90%, it reduces scope of increasing market share in near future. (b) Some of the companies key product like – Nintedanib, got covid related benefit in FY2021, which we don’t expect to continue in future. (c) Company has recently acquire 2 new manufacturing units, both the facility having low EBITDA margins and higher working capital requirement, this will create pressure on companies financials.
Outlook & Valuation: Based on FY2021 numbers, the IPO is priced at a Price to Earnings of 35.6 times and EV/EBITDA of 25.7 times at the upper price band of the IPO, which is on the higher side, compared to the listed peer group. Company already has a higher market share of 70%-90% in Key API’s which will limit growth in near future. Given the expensive valuation, we are assigning a NEUTRAL recommendation to the Ami Organics Limited IPO.
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