_1641277474905_1648449832231.jpg&w=3840&q=75)
With its diversified chemistry expertise, wide client base, and presence across many sectors, global research firm Jefferies believes Anupam Rasayan is well-positioned to gain from the 'China + 1' theme.
The firm has initiated coverage on the stock with a ‘buy’ call and a target price of ₹1,040 per share.
An average of five analysts polled by MintGenie have a ‘strong buy’ call on the stock.
Jefferies further said, the 16% year-to-date correction in Anupam Rasayan share price makes the stock’s valuations favourable now.
In the base case scenario, Jefferies’s analysts predict revenue CAGR 33% over FY21-24E helped by new contracts and a target price of ₹1,040 per share. This implies around 17% upside from current levels.
However, under more favourable conditions, the stock is expected to rally to ₹1,270 per share target, around 44% higher than the current market price. For such a situation to occur, analysts expect revenue CAGR of 35% over FY21-24E and EBITDA margins to remain flat at 27% over FY22-24E.
A bearish scenario, where revenue grows 29% over FY21-24E, could see the stock plummet to ₹690 per share.
| Valuation | 2021A | 2022E | 2023E | 2024E |
| FYP/E | NM | 53.2x | 38.1x | 31.0x |
| EV/EBITDA | 46.7x | 31.2x | 22.8x | 18.9x |
| EV/REV | 11.2x | 8.4x | 5.9x | 4.7x |
| P/Rev | 10.8x | 8.2x | 5.8x | 4.6x |
| P/B | 5.6x | 5.1x | 4.5x | 3.9x |
The X-Factor
“No single chemistry contributes more than 12% of ARIL's revenues. It has developed expertise in continuous flow chemistry (lower cost and greener compared to batch process) and has migrated c30% of its manufacturing to this platform”, the report said.
The company provides CSM services to agro chem, personal care, pharma, pigments, and dyes verticals, which diversifies its revenue streams, the brokerage firm said. The diversification also reduces Anupam Rasayan’s vulnerability to any slowdown in the global agrochemical cycle.
Moreover, 35% of the ARIL revenue comes from its top 3 customers and 82% from the top 10.
For the quarter ended 31-12-2021, the company has reported a Consolidated Total Income of ₹271.12 crore, up 6.26% from last quarter Total Income of ₹255.16 crore and up 43.03% from last year same quarter Total Income of ₹189.56 crore. The company has reported a net profit after tax of ₹37.92 crore in the latest quarter.
Promoters held a 65.4 per cent stake in the company as of 31-Dec-2021, while FIIs owned 6.13 per cent, DIIs 3.35 per cent.
China-Plus-One
The "China-Plus-One" approach is a way for companies to diversify their reliance on China. Many multinational corporations are expanding their operations in growing Asian countries such as India, Vietnam, Thailand, Bangladesh, and Malaysia, where new manufacturing opportunities exist.
According to Jefferies, "China's climate aspirations have harmed the smooth operation of its chemical industry." China intends to be carbon-neutral by 2060. To do this, the country has set a goal of reducing energy intensity by 13.5 percent by 2025.
Jefferies added Indian players' CSM revenue CAGR (35 percent over FY18-21) has outpaced their Chinese peers' (16 percent), implying a market share gain.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
