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Buy This Small Cap Pharma Stock With A Target Price of Rs. 1572: IIFL Securities

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IIFL Securities Ltd a major broking house has placed a buy call on the stock of Astec Lifesciences Limited. The brokerage has set a target price of Rs. 1572 and estimates a gain of 20% in 1-year from the current market price. At the time of the brokerage's buy call, the market price of the stock was Rs. 1290-1330 and currently, it is trading at a market price of Rs. 1376 per share on the National Stock Exchange (NSE).

 

2QFY22 results of Astec Lifesciences Ltd

2QFY22 results of Astec Lifesciences Ltd

According to the brokerage "Export volumes grew 8% YoY in 2QFY22, whereas domestic volumes fell 28% YoY, as the company allotted the limited capacity available with it (in the context of the Mahad shutdown) to exports. Exports were also impacted by container shortages and higher freight costs. Almost 33% of 2Q export sales (including CRAMS) were deferred to 3Q: this translates into ~Rs215m of deferred sales that will be recorded in 3QFY22."

IIFL Securities has also said that "Besides, another ~Rs80m worth of material could not be despatched due to logistical hurdles. Hence, overall, ~Rs300m of revenues has spilled over from 2Q to 3Q. Volume growth was 11% in 1HFY22. Exports accounted for 55% of the company's revenues for 2QFY22. Capex is seen at ~Rs1.5bn in FY22, although management indicated that CAPEX plans may need to be revised upwards. Projects that have been under implementation include the herbicide unit (now commissioned), the new R&D center (expected to be ready by FY23- end), and the new fungicide plant (details on CAPEX for this unit to be shared by the next investor call)."

Management’s expectation
 

Management’s expectation

IIFL Securities in its research report has said that "The company's management has guided to very aggressive and high growth in the CRAMS business; specifically, management guided for ~50% CAGR in the CRAMS business for the next three years. Management expects to successfully achieve its FY22 profit growth target of 15-20%. Management also expects EBITDA margins to go up to ~24% in the next few years, from 20- 22% at present." The brokerage has also clarified that "This year, management expects 20-25% growth in enterprise sales, of which 15pps should come from volume growth. Four new CRAMS products are expected to be launched in FY22, plus another one in enterprise sales. Thereafter, two large enterprise products should be commercialised by 4QFY23: these are triazole fungicides."

Buy Astec Lifesciences Ltd with a target price of Rs. 1572

Buy Astec Lifesciences Ltd with a target price of Rs. 1572

IIFL Securities claims that "Ramp-up of capacity utilisation at the new herbicide unit, to be followed by commercialisation of two new triazole fungicides by 4QFY23, should drive strong growth. Besides, higher prices of propiconazole should boost margins, and visibility is strong. Hence, we raise FY22ii EPS by 8% to Rs39.3, to reflect a likely jump in earnings in 2H on revenue deferrals, rising prices and strong demand; we tweak up FY23-24ii EPS by 3% each. Our TP, rolled over to Dec-22, rises to Rs1,572. We keep our target 1YF P/E unchanged at 30x, and believe it is justified by promising growth prospects, healthy financial metrics and strong parentage."

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of IIFL Securities Limited. 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.

Story first published: Monday, November 22, 2021, 10:03 [IST]
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