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Synergy from acquisitions aids growth

Our View

Rossari’s reported operating profits at Rs 523mn (+49 YoY; +12% QoQ), stood marginally ahead of our and street estimates on better than estimated margins. Rossari, selectively revised prices to pass on the increase in raw material costs to consumers, thereby leading to an improvement in Ebitda margin to ~12% (from 11% in 3Q). The gradual pass-through is likely to continue over 1Q-2QFY23, with margins stabilizing by 2QFY23. Leveraging the additional capacity at Dahej and synergy from the acquisition of Unitop, Tristar and Romakk, Rossari, introduced new products across segments, leading to a volume growth of ~ 40% YoY during the FY22. Going ahead as well the growth momentum is likely to continued, along with improvement in margins. BUY

Result Highlights

* Revenue: The consolidated net-revenue stood at Rs 4.4bn (+101% YoY; +2% QoQ); while the strong YoY growth was led by the commissioning of additional capacity at Dahej and additional sales from the acquisition of Unitop, Tristar and Romakk, the modest QoQ growth was on account of elimination of lower profitability products from the portfolio.

* Consolidated Ebitda & PAT: Consolidated Ebitda at Rs 523mn stood higher by 49% YoY & 12%QoQ. Consol. PAT stood at Rs 241mn (+8% YoY; +7% QoQ). Ebitda margin improved QoQ to 12% (3Q: 11%) as Rossari, passed on some of the raw material price inflation to its customers, during the quarter.

* HPPC Segment: Revenue stood higher by 180% YoY and 3% QoQ at Rs 3.04bn, driven by the integration of Unitop, Tristar and Romakk, along with organic growth. During 4Q in HPPC a) Rossari leveraged synergy of polymer and surfactants to offer novel ingredients and b) forayed into nanotechnology space.

* TSC Segment: Revenue stood at Rs 1.098bn (+25% YoY; -1% QoQ), added various products in TSC segment based on polyester chemistry. Besides additional capacity at Dahej site, added to the portfolio of products for sizing market. Rossari utilized the capabilities of Unitop to develop products for the spin finish market.

* AHN Segment: Revenue stood at Rs 255mn (+17% YoY; +7% QoQ). New range of esters and glycerides were tested during the quarter to enhance gut health and reduce the use of antibiotics and artificial growth promoters.

Valuation

Maintain BUY on Rossari, with a revised Mar’23 TP of Rs 1355/sh (from Rs 1570/sh), as we make adjustments to our earnings estimates and also adjust our WACC to accommodate for the increase in interest rates. Our TP is premised upon a Revenue and Operating earnings CAGR of ~20%(FY21-30e), with a RoE profile of ~17-18%

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