IGI Logo

Earnings growth aided by acquisitions   

Our View:

Rossari’s reported operating profits at Rs 467mn (+37 YoY; +6% QoQ), stood below expectations primarily on raw material price inflation. Even though high raw material prices impacted margins, but gross margins nevertheless improved on sequential basis to 25% (2Q: 22%), on account of product price revisions undertaken by the company. The robust YoY growth in operating profits was driven by integration of recently acquired Unitop and Tristar. Going ahead, the company, expects to see 15‐20% growth in earnings, FY23 onwards. Overall, capacity utilization for 3QFY22 stood at 60%, with expectations of continual improvement in coming quarters, the utilization is expected to reach 100% by FY24. Rossari has no major capex plans for next few years, and is going to undertake only maintenance capex in the range of ~Rs 40‐50mn, annually. Maintain BUY with a TP of Rs 1570/sh.

Result Highlights

* Revenue: The consolidated net‐revenue stood at Rs 4.3bn (+104% YoY; +11.4% QoQ), driven by strong revenue traction in HPPC segment, even as revenue for TSC and AHN segments stood weaker sequentially   

* Consolidated Ebitda & PAT: Consolidated Ebitda at Rs 467mn stood higher by robust 37% YoY & 6%QoQ.  Consol. PAT stood at Rs 225mn (+56% YoY; +31% QoQ).  

* HPPC Segment: Revenue stood higher by 155% YoY and 29% QoQ at Rs 3.05bn, driven by stable offtake in FMCG, anti‐viral & personal hygiene product portfolio volumes. Also, consolidation with Unitop and Tristar, led to strong YoY growth. Integration of Romakk would incrementally boost HPPC segment revenue.    

* TSC Segment: Revenue stood at Rs 1.03bn (+31% YoY; ‐6% QoQ), added various products in TSC segment including polyester resins, Lycra protectors, bleaching range, table flooring substitute. Going ahead higher utilization at Dahej Plant is expected to contribute to segment revenue.  

* AHN Segment: Revenue stood at Rs 204mn (67% YoY;  ‐47% QoQ). Revenue decline on QoQ basis was on account of pent up demand in 2QFY22.

* Capex: Rossari doesn’t have plans for extensive capex and intends to invest Rs 40‐ 50mn, annually on on‐going maintenance capex.

Valuation

We maintain our BUY rating on Rossari with a DCF based TP of Rs 1,570/sh. Our TP implies a target P/E multiple of 43x FY24e, as against 28x the stock is currently trading at. We have revised our EPS estimate in accordance with higher amortization charge, with respect to intangibles associated with acquisition of Unitop and Tristar. Our operating earnings CAGR (FY21‐30e) nevertheless stands at ~20% and forms the basis of our target price.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer