Hold Laxmi Organic Industries; target of Rs 300: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Laxmi Organic Industries

We cut our FY24/25E EPS estimates by 18%/13% and reduce the TP to Rs300 (SOTP based) vs Rs335 earlier (implied consol FY25E EV/EBITDA of 16x and PE of 24x), given (1) slower than expected revenue growth in Specialty Intermediates (SI) segment ex-new long term contract, on persisting demand weakness in some key applications (2) sharp price correction (ETAC price down >30%YoY) and normalization of spreads in Acetyls (AI) and (3) slow execution of Fluorochemicals plant setup and no. of product launches curtailed further to 6-8 (vs 8-10 earlier); supply contracts still awaited.

Outlook

We believe, SI and AI will remain LXCHEM’s core businesses in the medium term (SI revenue visibility remains high given long term contracts), while FI will be a long term earnings driver. EBITDA contribution from higher value segments (SI+FI) will increase to ~70% by FY25E from ~55% in FY22 as SI EBITDA grows at ~16% CAGR and FI earnings commence in Q4FY23. We maintain ‘HOLD’ rating given correction in the stock price.

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Laxmi Organic Industries - 27 -01-2023 - prabhu