IIFL Bullish On This Small Cap Specialty Chemical Stock For Potential Gains Of 28%

IFL Securities post the small cap specialty chemical company -Anupam Rasayan's results has given a 'Buy' call with a revised target price. Below are the details as put in the brokerage's research report.

About Anupam Rasayan: Anupam Rasayan is engaged in the business of custom synthesis and manufacturing of specialty chemicals in India. The company is a small cap stock with a m-cap at Rs.7727 crore.

1QFY23 Performance:

"Anupam delivered a stellar operating performance in 1Q, with revenue and Ebitda beating estimates. However, an Rs165m forex
loss and a higher than estimated ETR caused PAT to be in-line".

Concern at the firm as sited by the brokerage

Working capital / inventory days have been a cause for concern. However, Mgmt are confident of reducing the burden in FY24, as the
pricing mechanism clause starts getting revised to 6 months.

Orders and LoIs with the concern

Orders and LOIs in hand, worth Rs26.2bn, offer fairly good growth visibility. Growth beyond that is driven by the foray into fluorination, the revenue potential of which is around US$220-260m.

Brokerage's estimate on company financials

The brokerage's estimates assume PAT Cagr of ~35% from FY22 to FY25. However, elevated working capital levels are keeping the RoE subdued.

Target price and valuation of Anupam Rasayan

"While we raise FY23-25ii Ebitda by 4-5% due to higher margins, EPS estimates fall by 0-9% as we assume a higher tax rate. Our TP,
rolled forward to Sep-23, increases to Rs990 (30x Jun-24 EPS)", says the brokerage.