Buy This Multibagger Speciality Chemical Stock For A Target Price of Rs. 535

Laxmi Organic Industries is a specialty chemical manufacturer centred on manufacturing acetyl intermediates, including acetyl products such as bulk solvents and aldehydes. The company is also a leading manufacturer of speciality intermediates such as ketene and diketene derivatives such as esters, amides, and arylides. The company's shares have risen from Rs 164.45 on March 25, 2021 to Rs 413.95 on February 23, 2022, 3:30 pm IST on the NSE, resulting in a multibagger return of +249.50 (151.72 percent) in one year. The stock has also grown by +52.00 (14.37 percent) in the previous six months, but it is down by -26.90 (-6.10 percent) year to date (YTD) and -3.50 (-0.84 percent) in one month. Following the release of the company's Q3-FY22 results, brokerage firm Anand Rathi assigned the stock a buy rating with a target price of Rs. 535.

Q3-FY22 Result of Laxmi Organic Industries Limited (LXCHEM)

The brokerage has highlighted that "Laxmi Organic Industries Limited reported revenue growth from operation of 97.4% YoY at Rs 8,599 million during Q3-FY22 as against Rs 4,355 million in Q3-FY21. Both Acetyl Intermediated Business and Specialty Intermediate Business recorded robust growth. SI business points towards a consistent improvement of the financial matrices while the acetyl business brings in necessary cash flows to fuel future growth and the investments. The company reported EBITDA of Rs 1,187 million in Q3-FY22 as against Rs 677 million in Q3-FY21, growth of 75.4% YoY. EBITDA Margins for Q3-FY22 stood at ~13.8%. The management expects the margin to sustain on the back of cooling raw material prices. The profit after tax (PAT) for Q3-FY22 came in at Rs 816 million as against Rs 452 million during Q3-FY21 recording a growth of 80.7% YoY."

As per Anand Rathi, "Acetyl Intermediate Segment reported revenue of Rs 5,303 million during Q3-FY22, a growth of 1.4x YoY. The strong performance of the acetyl intermediate is largely on account of increased realizations and higher volumes supported by the capacities of Yellowstone. While the Acquisition of Yellowstone has been completed the total capacity stands at 201,000 MTPA."

According to the brokerage "Specialty Intermediates business reported revenue of Rs 2,655 million during the quarter, a growth of 1.1x YoY. The robust performance of the specialty intermediates business is attributable to ramped up production, increased realizations and a better product mix optimization towards higher value-added products. The performance was also aided by the continuing buoyant demand for their products from the international market, about 29% of Q3- FY22 specialty sales are from exports as against 9% during Q3-FY21. The Specialty Intermediates business Capex is projected at Rs 200 crore and the same is expected to be commissioned by Q1-FY23."

Buy for a target price of Rs 535

The brokerage has claimed that "Fluoro Specialty Business is expected to begin commercial production during Q3-FY23. The project is facing a delay and cost escalations on account of covid, escalations in the prices of construction materials and logistics challenges. The company has decided to launch phase II of the Capex to add incremental capacities simultaneously. This will entail an incremental ~Rs 160 crore Capex as compared to earlier planned capex of ~Rs 290 crore. The Management expects a turnover of the order of 280 to 300 Crores initially."

Anand Rathi has said "The Company has de-risked business model with diversified customer base and portfolio across industry as well as presence across various geographies. We expect the growth momentum to continue in the medium term supported by ongoing strong Capex plans. We maintain our Buy rating on the stock with a revised target price of Rs 535 per share."

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.