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Our Take:

Amrutanjan Healthcare ltd (AHCL) is one of the oldest ayurvedic and OTC Indian brand. The core focus of the company is to create a niche for itself with a strong portfolio of affordable healthcare, personal and hygiene care products in a highly competitive market dominated by premium brands. Amrutanjan Pain Balm (Yellow Balm) is the flagship brand of the company; apart from this it has been constantly expanding its product portfolio with a range of pain management products (aromatic balms, creams and sprays for headaches, body aches).

AHCL also has presence in premium category products under its sub brand “Roll-on” and has also launched brand “Relief” which caters to congestion related issues (cold rubs, nasal inhalers, lozenzes and cough syrups). AHCL in 2015 had also diversified into sanitary napkins under the Brand “Comfy” which has been positioned as an affordable alternative for larger target audience. Comfy been a key revenue growth driver for the company over last 6 years. It has recorded a revenue growth of CAGR 91% over FY15-21.

As on FY21, it reported a revenue of Rs. 54Cr. Also in 2011, AHCL has acquired Siva's Soft Drink Pvt Ltd along with its flagship pulp-based flavored fruit drink brand “Fruitnik”. Its revenue as on FY21 stood at Rs. 17Cr. AHCL as per its M5K distribution plan, is in the process of expanding its distribution network in rural and semi urban areas to strengthen its footprint. It aims to ramp up its distribution network appointing 5,000 distributors and sub-stockists.

The company also plans to scale-up its presence in the e-com channel and aims to increase its contribution to 1.3% from ~0.5% currently of overall revenues. In the OTC domestic market as on FY21, segment-wise Head contributed 72.9% followed by Body 7.3%; congestion 2.5%; H&H 1.4% and women’s hygiene contributed 16% of overall revenues. Amrutanjan was ranked No.33 among top 50 brands in the “Health and Personal Care” segment according to the Economic Times Brand Equity (Most Trusted Brands) 2018 Survey.

Valuation & Recommendation:

AHCL’s earnings grew at a CAGR 17% FY17-21. Going forward, we are positive on the future growth prospects and expect AHCL to be ahead of the category performance mainly in the OTC segment. In our view, AHCL’s revenue and PAT is likely to record a growth of 17.5% and 16.7% CAGR over FY21-23E. Along with this we expect the company to generate consistent FCF with consistent high ROEs. The Comfy brand is expected to be the key growth driver for AHCL.

We expect, “Comfy” revenues to grow at CAGR 28% while other OTC products are expected to grow at CAGR 13.2% over FY21-23E. Though AHCL is in branded personal are segment, it may not get the valuations that other FMCG players get due to its single brand and single segment concentration, though it has been working to diversify that and has succeeded to some extent so far. However we feel that there is a scope for some upward valuation re-rating in the stock currently.

We feel investors can buy the stock in the band of Rs. 820-830 and further ad on dips at Rs. 732 (26x FY23E) for a base case fair value of Rs. 900 (32x FY23E) and bull case fair value of Rs. 970 (34/5x FY23E) for a time horizon of 2 quarters.

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