Anupam Rasayan Shares Gain As Jefferies Says 'Buy'
Jefferies has set a price target of Rs 1,040 apiece for Anupam Rasayan, a potential upside of 20.31%.
Shares of Anupam Rasayan India Ltd. gained after Jefferies initiated coverage on the specialty chemical maker with a ‘buy’.
“Anupam Rasayan is well-positioned to benefit from ‘China+1’ with its diversified chemistry expertise, wide customer base and presence across multiple verticals,” the research house said in a March 24 report. ”Strong long-term contract pipeline offers medium-term growth visibility.”
China’s climate policy, the report said, has impacted the functioning of its chemical industry. “Custom synthesis and manufacturing revenue growth of Indian players has outstripped their Chinese counterparts over the past three years, suggesting a market share shift to India.”
Besides, no single chemistry contributes more than 12% to the company’s revenue, implying presence across multiple verticals, Jefferies said.
Anupam Rasayan, according to the report, derives 35% of its revenue from its top three customers and 82% from the top 10, reducing the risk from potential loss of any customer. “It provides CSM services to agrochemicals, personal care, pharma, pigments and dyes verticals, which diversifies its revenue streams. This reduces its vulnerability to any slowdown in the global agrochemical cycle.”
Jefferies has set a price target of Rs 1,040 apiece for Anupam Rasayan. That implies a potential upside of 20.31%. It forecasts the company’s Ebitda and profit after tax to grow at an annualised rate of 29% and 31%, respectively, over FY22-24E on the back of the “recent contract wins and new molecules commercialised”.
The company has bagged contracts worth Rs 820 crore and letters of intent of Rs 1,800 crore so far in FY22.
Key risks, according to the research house, include the small size of the company’s core R&D team, potential loss of any key customer, environmental risk of solid waste disposal, and slowdown in the global agrochemical cycle.
Shares of Anupam Rasayan—listed on March 24, 2021—have gained nearly 5.5%, the most in seven sessions, around 10:15 a.m. on Friday. The stock pared the gains to close little changed. Since listing, the stock has more than doubled as on Feb. 2, 2022. But from then on it has dropped 20% as crude prices spiked.
Valuation, Jefferies said, is favourable after the correction.
The stock’s trading volume was nearly twice the 30-day average when markets closed Friday. Of the seven analysts tracking the company, six suggest a ‘buy’ and one recommend a ‘sell’. The 12-month consensus price target implies an upside of 24.8%.
Other Highlights from the Jefferies report:
Expects a 33% revenue CAGR over FY22-24E.
Raw-material inflation will impact its short-term portfolio and the favourable product mix of FY22 should normalise in FY23E. Operating leverage could cushion the impact.
New plants for recently awarded contracts can be set up on surplus land in the company’s possession and use common facilities (for instance: pilot plants, effluent treatment plants, boilers). This should improve return ratios by 440 basis points to 12.1% by FY24E.
Values the stock at 38 times price-to-earnings.