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First Cut: Extremely encouraging performance on the back of Acetyls and Specialty Segment 

Ingrevia trades at ~11.4x FY23E EV/EBITDA. Given that Specialty and Nutrition business contributes >70% of our FY23E EBITDA, we believe there is room for further re-rating

* Financial Performance
- Sales at INR 1145crs up 6% QoQ / 55% YoY
- EBITDA at INR 287crs up 43% QoQ / 126% YoY
- EBITDA margins 25% vs 19% QoQ
- Inventory gains of INR ~63crs; adjusting which EBITDA margins at 20%
- PAT at INR 168crs vs INR 96crs QoQ.

* Life Science Chemicals:

Operating at 27% EBITDA margins. Of the INR 187crs EBITDA for the segment, INR 60crs of which is led by Inventory gains on account of Acetic Acid. The demand scenario continues to remain strong; pricing however as per us should moderate over the medium term.  

* Specialty:

18% Top-line growth and 22% bottom-line growth. Largely led by volumes in pyridines, we believe this is backed by Chinese ADD being taken off. Performance in this segment as per us is likely to continue. Diketene commercial production to be live in Q3FY22; strategy is target import substitution. 

* Nutrition: EBITDA de-grew on account of higher input cost and MEIS incentives taken off. Strong demand across customers and margins are likely to improve on account of pass-on of higher input costs. 

* New Areas: As guided earlier, Capex during the year is expected to be INR 350crs. New CDMO unit and 2 new multi-purpose plants for Specialty Chemicals to commercialize in Q1FY23; this should further improve EBITDA share of Specialty Chemicals. 

* We have a base case March-22 target price of  INR 770 valuing at 15x EV/EBITDA, which implies 31% upside on the CMP. Our Bull / Bear case TP is at INR 1015 and INR 450 respectively.

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