Q3FY24 Review: Anupam Rasayan: Hit by cyclical downturn

13 Feb 2024 , 02:12 PM

ANURAS reported sales/Ebitda decline (for the first time since listing) in Q3 with industry headwinds taking toll on its financial performance. The management commented that its clients offtaking minimum required quantities to manage their year-end working capital has led to de-growth in revenues. The performance is expected to now pick-up in couple of quarters. The company has signed a LoI worth Rs5bn in Q3 thereby taking the total LOIs signed in the last three years is Rs81.7bn. On getting converted into agreements, these LOIs are expected to be fully ramped up only in FY26. Weak Q3 performance and subdued outlook for FY25 compels us to cut FY24-26 EPS estimates by 18-28%. Analysts of IIFL Capital Services TP, rolled forward to Mar’25 comes down to Rs730 (28x Mar’26 PE). Retain REDUCE. 

Base business declines: 

Standalone revenue declined by 26% YoY while Ebitda margins were largely flat. Finance costs jumped 78% YoY to Rs252mn as working capital continued to remain elevated. Though management didn’t share any specific data on working capital days, it opined there was not much improvement QoQ (300 days) and it would be difficult to bring it down to guided figure of 200 days in FY24. Tanfac business sales/Ebitda declined 11%/35% YoY to Rs878mn/Rs146mn. 

Infuses capital again: 

The Company has issued preferential allotment of equity shares worth Rs1.8bn to promoters and Rs3.7bn worth warrants to institutional investors during Q3. It has received Rs2.72bn through equity shares and first tranche of warrants, out of which it has now repaid Rs1.9bn worth of term loans. The management has guided to an elevated working capital situation in near term and expects easing towards 2HFY25. 

Expensive valuation:

Weak Q3 performance and challenging near term outlook compels us to cut FY24-26 EPS estimates by 18-28%. The demand is now expected to recover from 1HFY25 onwards with improvement in working capital resulting into lower interest cost. The stock is trading at ~43/29x FY25/26 PE, which analysts of IIFL Capital Services believe to be expensive, given the elevated working capital profile and challenges to near term growth outlook. Analysts of IIFL Capital Services TP, rolled forward to Mar’25 comes down to Rs730 (28x Mar’26PE). Retain REDUCE.