Add Anupam Rasayan Ltd For Target Rs.990 - IIFL Securities
Strong operating performance
• While we raise FY23-25ii Ebitda by 4-5% due to higher margins, EPS estimates fall by 0-9% as we assume a higher tax rate. Our TP, rolled forward to Sep-23, increases to Rs990 (30x Jun-24 EPS).
• Anupam delivered a stellar operating performance in 1Q, with revenue and Ebitda beating estimates. However, an Rs165m forex loss and a higher than estimated ETR caused PAT to be in-line.
• Working capital / inventory days have been a cause for concern. However, Mgmt are confident of reducing the burden in FY24, as the pricing mechanism clause starts getting revised to 6 months.
• Orders and LOIs in hand, worth Rs26.2bn, offer fairly good growth visibility. Growth beyond that is driven by the foray into fluorination, the revenue potential of which is ~US$220-260m.
• Overall, ARIL remains focussed on growth. Our estimates assume PAT Cagr of ~35% from FY22 to FY25. However, elevated working capital levels are keeping the RoE subdued.
Result highlights
• While Anupam’s 1QFY23 revenue was marginally above our estimate, the company surprised on margins, delivering a consolidated Ebitda margin of ~30.6% (vs our estimate of ~25%). The beat in margins was largely driven by lower than expected ‘other expenses’.
• Management highlighted that revenue growth was driven equally by price and volume growth.
• The company incurred forex loss of ~Rs165m which, along with a higher than expected effective tax rate of 34% (vs our estimate of ~26%), led to PAT being in-line with our estimate.
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