Anupam Rasayan: KRChoksey Maintains ‘Accumulate’ Rating Despite Q1FY25 Headwinds, Sees Pharma and Polymer Driving Future Growth

Anupam Rasayan: KRChoksey Maintains 'Accumulate' Rating Despite Q1FY25 Headwinds, Sees Pharma and Polymer Driving Future Growth

KRChoksey Research has maintained its 'Accumulate' rating on Anupam Rasayan India Ltd., setting a target price of INR 810. This represents a potential upside of 5.2% from the current market price of INR 770. The brokerage acknowledges the company's weaker-than-expected Q1FY25 performance, primarily due to a slowdown in the agrochemicals segment, but anticipates a recovery in H2FY25E driven by growth in the pharma and polymer segments.

Key takeaways from the report:

  • Revenue declined 34.2% YoY in Q1FY25, driven by lower agrochemical volumes.
  • EBITDA and PAT margins contracted due to lower sales and higher operating expenses.
  • Pharma and polymer segments showed strong growth, supported by new molecule launches.
  • The company plans to launch more molecules in both pharma and polymer segments in FY25E.
  • Long-term contracts (LOIs) worth INR 89,190 Mn provide revenue visibility.

KRChoksey highlights the challenging environment in the agrochemical industry, marked by an unwinding of channel inventory, as the primary reason for Anupam Rasayan's subdued Q1FY25 performance. Revenue fell short of estimates, and profitability suffered due to lower sales and increased operating costs. Despite this, the brokerage notes the strong growth in the pharma and polymer segments, each contributing 15% and 10% to revenue respectively. This positive momentum is expected to continue, leading to a more balanced product portfolio.

Looking ahead, the company anticipates a demand recovery in the agrochemical segment in the second half of FY25E. Furthermore, Anupam Rasayan plans to launch more than five new molecules across the pharma and polymer segments in FY25E, adding to its growth momentum. The company's order book, bolstered by long-term contracts worth INR 89,190 Mn, provides strong revenue visibility.

The management has also undertaken initiatives to reduce the company's environmental footprint, including investing in a hybrid power plant that will provide 65% of its electricity needs from renewable sources. This is expected to lead to significant cost savings in the long run.

While acknowledging the near-term challenges, KRChoksey remains optimistic about Anupam Rasayan's long-term prospects. The brokerage expects revenue to grow at a CAGR of 16.9% and adjusted PAT to grow at a CAGR of 31.5% between FY24 and FY26E. The valuation is based on a PE multiple of 36x assigned to FY26E estimated EPS of INR 22.5.

Potential risks and challenges mentioned in the report:

  • Continued weakness in the agrochemical segment beyond H1FY25E.
  • Delays in new molecule launches or ramp-up of LOIs.
  • Increased competition in the specialty chemicals space.

Forward-looking statement:

KRChoksey believes that Anupam Rasayan's strong growth potential in the pharma and polymer segments, coupled with a recovery in agrochemicals, will drive future growth. The company's strategic initiatives, long-term contracts, and focus on sustainability position it well for the future.

Valuation Method:

The report utilizes a Price-to-Earnings (PE) multiple valuation method, applying a multiple of 36x to the estimated FY26E earnings per share.

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