Accumulate Ami Organics; target of Rs 1200: KR Choksey

KR Choksey's research report on Ami Organics

For Q3FY24, Ami Organics revenue increased 9.2% YoY (-3.4% QoQ) to INR 1,664 Mn. The revenue missed our estimate by 7.4% due to a sharp decline in price realization in specialty chemical segment and advanced intermediates segment. For 9MFY24, the revenue increased by 14.4% YoY to INR 4,925 Mn. EBITDA for the quarter declined by 13.9% YoY (+6.8% QoQ) to INR 265 Mn. EBITDA missed our estimate by 14.0% due to an unfavorable product mix and an increase in operating expenses, especially employee costs. EBITDA margin contracted 429 bps YoY but expanded 153 bps QoQ to 15.9%. For 9MFY24, EBITDA increased by 4.2% YoY to INR 853 Mn, and the EBITDA margin contracted by 171 bps to 17.3%. PAT declined by 20.1% YoY to INR 178 Mn. PAT missed our estimate by 5.6% due to weak operating performance, higher depreciation and finance costs. The PAT margin contracted 392 bps YoY to 10.7%. For 9MFY24, PAT declined by 59.1% YoY to INR 230 Mn. The PAT margin contracted by 839 bps YoY to 4.7%. We believe the growth drivers for FY25E are the Apixaban launch in Europe, the ramp-up of the UV absorber and ramp-up of electrolytes and additives where they have secured long-term contracts.

Outlook

Currently, the stock is trading at a PE multiple of 39.7x and 32.0x based on FY25E/FY26E EPS, respectively. We introduce FY26E estimates; expect FY23-FY26E revenue CAGR of 19.6% and corresponding Adj. PAT CAGR of 14.9%. We apply a PE multiple of 35.0x to our FY26E EPS of INR 34.27 and arrive at a target price of INR 1,200 (INR 1,225 previously). Accordingly, we maintain our rating of ACCUMULATE on the stock, with a potential upside of 9.6%.