Reduce Laxmi Organic Industries Ltd for the Target Rs 150 by Prabhudas Liladhar Ltd
Higher volumes and realizations drive growth
Laxmi Organic Industries (LXCHEM) reported consolidated revenue of INR10.8bn in Q2FY27, up 54.7% YoY and 11.8% QoQ, driven by volume growth, higher realizations, an improved product mix and pass-through of higher raw material costs. The Essentials segment contributed 77% to revenue and grew 61% YoY, with EBITDAM expanding 800bps YoY, supported by strong double-digit volume growth and improved spreads. The Specialty Chemicals segment reported 36% YoY revenue growth, while EBITDAM expanded to 220bps YoY but declined 280bps QoQ due to delayed cost pass-through under long-term customer contracts. Management indicated that higher input costs could not be immediately passed on to contract customers.
The company expects the Fluorochemicals segment to contribute INR1.5–1.6bn in FY27. Meanwhile, the newly commissioned Ethyl Acetate capacity at Lote has stabilised, while the new Diketene capacity at Dahej has been commissioned. Management expects Dahej Phase II to stabilize, followed by a gradual ramp-up through FY28.
Currently, higher acetyl spreads are supporting the Essentials segment's performance. However, we believe this is temporary, with spreads likely to normalise over time. At the current market price, the stock trades at 22x FY29E EPS. We value the company at INR150/share based on our SOTP valuation and maintain our 'Reduce' rating.
Revenue increased 55% YoY/12%QoQ:
Consolidated revenue stood at INR10.8bn (54.7% YoY/ 11.8% QoQ) (PLe: INR9.2bn, Consensus: INR 9.2bn), actual topline was 17.7% higher than our estimate. H1FY27 revenue was at INR20.5bn, increased by 47.3% YoY. Driven by strong volumes and prices across portfolio However Gross profit margin was 33.6% (vs 33.1% in Q2FY26 and 37.5% in Q1FY27), decreased by 390 bps QoQ Flat on YoY.
EBITDAM expanded by 470bps YoY:
EBITDA stood at INR1,080mn, increasing 191.3% YoY but declining 5.5% QoQ (PLe: INR1,064mn). EBITDA margin stood at 10% (vs. 5.3% in Q2FY26 and 11.8% in Q1FY27), with the QoQ decline primarily due to higher raw material costs. Notably, Q2FY26 EBITDA included a one-time supply chain redesign project expense of INR23mn (PAT impact: INR17mn). Reported PAT stood at INR570mn, up 418% YoY but down 15.8% QoQ, partly due to higher employee expenses. PAT margin stood at 5% (vs. 2% in Q2FY26 and 7% in Q1FY27).
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SEBI Registration number is INH000000933
