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Leadership and expansion will drive growth

Incorporated in 1989, Laxmi Organic Industries Ltd is a leading manufacturer of Acetyl Intermediates and Specialty Intermediates, with almost three decades of experience in large-scale manufacturing of chemicals. The company’s products are largely used in various high-growth industries such as pharmaceuticals, agrochemicals, dyes & pigments, inks & coatings, paints, printing & packaging, adhesives, etc. They have two manufacturing facilities in Mahad, Maharashtra with one each for both products. Further, they have expanded operations globally, with a presence in over 30 countries.

Investment Rationale

* Leading manufacturer of Ethyl Acetate with significant market share

* Only Indian manufacturer of Diketene derivatives

* Expanding into fluorospeciality chemicals business

Outlook & Valuation

Laxmi Organic operates in a specialty chemical space that has high entry barriers and is capital intensive. However, the company is well-placed with a strong product portfolio and technologically driven R&D and manufacturing facilities. Going forward, the company intends to innovate new products, undertake contract manufacturing and expand its geographical presence which will increase revenue as well as market share.

Besides, they have plans to expand their manufacturing capabilities for the Acetyl Intermediates and fluoro-chemical which augurs well for future growth. On the financial front, we have estimated revenue and PAT to grow at a CAGR of 15% and 20% over FY21-23E. We have a positive view on the company’s long-term growth plans thus we have initiated coverage on the stock with a buy rating and a target price of Rs 279.

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