Shares of Anupam Rasayan climbed more than a percent in morning trade on BSE on October 14. The stock has been on a roll for the last four months.
Anupam Rasayan stock hit its 52-week low of ₹547.10 on June 20, 2022; since then, it has jumped more than 33%.
The stock, however, is still 34% below its 52-week high of ₹1,106 that it hit on February 2, 2022.
Brokerage firm Nuvama Wealth Management (formerly Edelweiss Securities) has initiated coverage on Anupam Rasayan stock with a 'buy' call, pegging the target price of ₹1,069.
The brokerage firm believes Anupam Rasayan is a direct beneficiary of the global outsourcing boom, the government’s focus on ‘Make in India’ and the ‘China Plus One strategy.
"With its expanding chemical capabilities – organic and inorganic – and aggressive capacity addition, Anupam is a strong outsourcing partner for global agro-chem and pharma players," said Nuvama.
"We believe the Indian CRAMS (contract research and manufacturing services) market would benefit from multiple growth drivers: (i) Strong demand from end-user industries such as agro and pharma. (ii) Global innovators partnering with players such as Anupam for outsourcing manufacturing operations as well as product development to enhance efficiency and optimise cost. (iii) Government’s ‘Make in India’ thrust. (iv) The China Plus One strategy taking root," the brokerage firm said.
Nuvama believes Anupam is poised to benefit from its aggressive investment in plants (2.2 times jump in capacity over last three years), development and scale-up of chemistries, investment in new technologies and large client-wins, viz., BASF, UPL and Adama.
"A strong product pipeline, commercialisation of seven–eight products per year and recent order-wins with annual revenue potential of nearly ₹4.75 per year drive growth visibility. With its focus on working capital reduction by entering into short-term price contracts and higher asset turnover driven by increased utilisation, Anupam shall witness massive gains in operating leverage," said Nuvama.
The brokerage firm estimates Anupam would clock a 30% revenue CAGR over FY22–25, driven by a strong product pipeline and higher utilisation of existing assets.
EBITDA would expand at a 31% CAGR while PAT would outstrip at a 38% CAGR driven by strong operating leverage, the brokerage firm believes.
"Due to the uptick in fixed asset/TO 1.2 times from 0.9 times and focus on working capital reduction, we reckon Anupam’s RoCE would rise from 11% to 18% by FY25E. In light of the anticipated strong growth, we assign a target PE of 38 times FY24E, which yields a target price of ₹1,069," the brokerage firm said.
Nuvama underscored (i) higher customer concentration—top ten players make up 84% of revenue, (ii) volatility in key raw material prices (benzene, phenol), (iii) delays in new product launches and (iv) inability to reduce working capital cycle are the key risks for the company.
According to a MintGenie poll, an average of 7 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.
