This Small Cap Stock Is A Buy For 50% Gains On Strong & Growing Niche Play

Despite the stock market carnage, there are some stocks that may continue to perform well, due to a number of factors. One such stock, according to Anand Rathi is the stock of Ami Organics.

Buy the stock for a target price of Rs 1354

The brokerage sees the stock at Rs 1354, as against the current market price of Rs 898 on the NSE, that implies an upside of 50% from current levels.

"Ami Organics Limited has reported a growth of 53.5% in its consolidated revenues at Rs.1,412 million in Q3-FY22 as against Rs.920 million in Q3-FY21. The performance wan driven by robust growth in core Pharma Intermediary business as well as stronger growth in Specialty Chemicals business," broking firm Anand Rathi has said.

On the profitability front, the company's consolidated operating margins (Ex. Other Income) stood 21.2% at Rs 299 million in Q3-FY22 as against 17.1% at Rs.217 million in Q3-FY21.

"The marginal decline in operating performance was mainly attributable to lower margins in Gujarat Organics business on cost front, the company witnessed cost pressure but was able to pass on costs increase. The consolidated PAT margins for the company during the quarter stood 13.9% at Rs.196 million as against 15.8% at Rs.145 million in Q3-FY21," the brokerage has said.

Import substitute products

During the quarter, the company has commercialized two new import substitute products in Pharma segment, as per the management these newly launched products are seeing good tractions in the market with very encouraging response from the customers and are expected to contribute significantly to company's top line. Ami Organics has also strong pipeline of new products which are expected to be launched in further quarters.

"Also, during the quarter the company has successfully transferred current production operations of specialty chemical business at Ankleshwar facility to Jhagadia Facility. The company do not expect any revenue loss because of transfer of production operation from Ankleshwar to Jhagadia unit of Company," Anand Rathi has said.

Expansion plans

According to the brokerage firm, the Ankhleshwar facility would be repurposed for the expansion of Pharma Intermediates business to support the future growth. The proposed expansion is currently in the design and engineering phase.

"Going ahead the company plans to increase its utilisation levels at its newly acquired facility and further plans to incrementally add capacities to aide growth.

"With the presence in high growing and niche markets Ami Organics Limited is set to continue to post better growth in mid term. We have incorporated current financials and updated our numbers for the company. We continue to remain positive on the stock and maintain our BUY rating on the stock with a target price of Rs 1,354 per share," the brokerage has stated.

The shares of Ami Organics were last seen trading at Rs 898 on the NSE.