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Brokerage Is Bullish On This Small-Cap Spec. Chemicals Stock, Suggest Buy For Robust 79% Gains

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Monarch Networth Capital, a well-known brokerage firm, in its report published last week on Jubilant Ingrevia Ltd, a small-cap Speciality Chemicals company, suggests buying for 79% potential upside. Currently, the company is attractively placed at ~6x payback period in terms of the cash profit of FY25E which gives an attractive reward potential at the CMP (Current market price) with limited Downside risk.

 

CMP, Target Price, Potential Gains, Performance & Returns

CMP, Target Price, Potential Gains, Performance & Returns

Jubilant Ingrevia's stock today opened at Rs 497.60/share, currently trading at Rs 498/share at the time of writing. The target price of the stock estimated by the brokerage is Rs 890/share. The stock recorded a 52-week low at Rs 401.20 on 08 March 2022, and a 52-week high at Rs 838.75 on 18 October 2021. The P/E ratio is 16.71, PB ratio is 3.23. EPS-TTM is Rs 29.93.


In the last 1 year, the stock has fallen nearly 9.09%. Whereas, in a short-term period like 1 month, 3 months, and 1 week, the stock performed well and gave positive returns. Last week, the stock gained 19.83% in share price, 6.64% in 1 month and 5.9% in 3 months. This indicates the stock has performed exceptionally in the last 1 month compared to the whole year.

Although the stock has witnessed a fall in share price in the last 1 year, it gave good returns in the last 1 month the brokerage is bullish on the stock. Considering the Target Price and the CMP of the stock, the stock is likely to gain nearly 79%.

CMPTarget PricePotential Returns
Rs 498Rs 89079.00%
Spec. Chem to lead the way to healthy growth and better margins
 

Spec. Chem to lead the way to healthy growth and better margins

Chemical Intermediates revenues were impacted due to Acetic Acid prices (Rs 54crs in Q4FY22 Inventory loss) however the segment sales grew by ~60% YoY while Spec chem and Nutrition revenues grew by ~24% and ~22% YoY respectively in FY22. Commercialisation of Diketene, Agro-active and CDMO facility can significantly improve the overall profile of Ingrevia to a specialty-focused organisation leading to a better margin profile for the business. CDMO as per us will be a significant growth area for Ingrevia's Spec Chem segment.

New capex initiatives to increase Potential sales; business profile to have a significant facelift

New capex initiatives to increase Potential sales; business profile to have a significant facelift

Ingrevia had previously announced a capex of ~ Rs 900Crs and in Q4FY22 announced an additional capex of Rs 1250crs. Both these capex programs largely focus on Speciality Chemicals business with ~60% of the funds committed to the same. Peak Sales Potential post capex remains Rs 9500crs (~2x of FY22 sales) as per the company and capex initiatives of Rs 2,050crs can contribute Rs 4500crs as peak sales; According to us, Ingrevia should hit the peak sales by FY27.

The brokerage said, "We believe that incremental revenue growth with the commencement of new facilities coupled with increased contribution from the non commoditised business would lead to a better quality and more stabilised margin profile."

Buy for a target price of Rs 890/share, suggests Monarch Networth Capital

Buy for a target price of Rs 890/share, suggests Monarch Networth Capital

The brokerage said, "We expect Ingrevia's operating profitability to sustain and increment over the near to medium term, given its expanding portfolio of value-added products, and a favorable pricing scenario in the nutrition and Spec chem segments. Currently, the company is attractively placed at ~6x payback period in terms of the cash profit of FY25E which gives an attractive reward potential at the CMP with limited Downside risk. We thus arrive at our Mar-23 Target Price of Rs 890 valuing Ingrevia at 12x FY24E EV/EBITDA, which implies 113% upside on the CMP. Our Bull / Bear case Target Price is at Rs 1136 and Rs 552, respectively."

About- Jubilant Ingrevia Ltd

About- Jubilant Ingrevia Ltd

Jubilant Ingrevia, is a global integrated Life Science products and Innovative Solutions provider serving, Pharmaceutical, Nutrition, Agrochemical, Consumer and Industrial customers with our customised products and solutions that are innovative, cost-effective and conforming to excellent quality standards. Jubilant Ingrevia Limited offers a broad portfolio of high-quality ingredients that find application in a wide range of industries. Jubilant Ingrevia's portfolio also extends to custom research and manufacturing for pharmaceutical and agrochemical customers on an exclusive basis.

Disclaimer

The stock has been picked from the brokerage report of Monarch Networth Capital. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

Story first published: Monday, June 27, 2022, 12:46 [IST]
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