Q4FY23 Review: Anupam Rasayan: Robust growth priced in

4 May 2023 , 01:22 PM

Anupam Rasayan (ANURAS) delivered robust YoY growth in Q4 — along the expected lines — led by Tanfac consolidation. Organic revenue grew ~14% YoY but consolidated margins fell ~400bps QoQ, due to an aberration in product mix. Management stated that the recently signed new LOIs will be commercialized over FY24 and FY25; fully ramped-up revenue contribution will likely begin in FY26. Analysts at IIFL Capital Services have maintained their FY24/25 revenue and EBITDA; however, EPS estimates are impacted 4-6% by an increase in finance costs. 

Robust revenue growth but margins fall

Standalone revenue grew ~14% YoY but margins fell ~400bps QoQ. Management attributed the fall in margins to an aberration in product mix and guided FY24 margins to be in the range of ~26-28%. Inventory days fell by ~93 days YoY to ~200 days, and are expected to continue to improve as revenue from the new LOIs ramps up. Net debt fell from ~Rs. 5.9 billion as at March 2022 to ~Rs. 2.4 billion as at March 2023.

Recently signed LOIs provide much-needed visibility

ANURAS’ capex plans (brownfield fluorination + LOI-related) remain on track and are expected to deliver strong medium-term growth. The company has signed three new LOIs (worth ~Rs. 28.6 billion) over the past couple of months, which are likely to get commercialized in FY24 and FY25. On getting converted into agreements, the LOIs are expected to be fully ramped up only in FY26. However, near-term growth will likely be driven by the ramp-up of molecules — contracts/LOIs for which were signed in FY22.

Valuations expensive

Analysts at IIFL Capital Services have maintained their FY24/25 revenue and EBITDA, but EPS estimates are impacted 4-6% by an increase in finance costs. However, the stock has run up sharply over the past couple of months and is currently trading at ~36x FY25 PE, which according to analysts at IIFL Capital Services is expensive. While the LOIs, if converted into supply agreements, will provide improved visibility; analysts at IIFL Capital Services believe that current valuations factor in all upside. Delay in commercialization of LOIs is a risk to their estimates. Their Target Price, rolled forward to June 2024 goes up to Rs. 980 (27x June 25 estimated PE) from Rs. 895.