PL Stock Report: Anupam Rasayan India (ANURAS IN) - Management Meet Update - Fluorination chemistry likely to drive growth - Not Rated

Anupam Rasayan India (ANURAS IN) - Swarnendu Bhushan - Co-Head of Research, Prabhudas Lilladher Pvt Ltd

Rating: Not Rated | CMP: Rs879 | TP: NA

Management Meet Update - Fluorination chemistry likely to drive growth

We met Mr. Anand Desai (MD) and Mr. Ravish Chaudhary (Sr. manager – Corporate strategy & Investor Relations) of Anupam Rasayan (ANURAS) who highlighted that with India’s CSM industry likely to grow at double digit CAGR over next couple of years, primarily driven by increased demand coupled with shift in manufacturing operations from China is driving demand for company’s products and solutions. The company is also increasing its focus on fluoro based chemicals and planning to launch over 12-14 molecules over next 12-18 months. We believe ANURAS is well placed to benefit in the long term given 1) its focus on commercialization of new products, 2) strong order book/LOI’s worth Rs76,690 mn and 3) expansion in fluorination chemistry. The stock trades at PE of 39.6x/27.7x FY24E/FY25E bloomberg estimates. Not rated.

Strong revenue outlook on back of robust LOI’s: During 1QFY24, the company had signed 3 LOI’S worth Rs40,660mn with a contract period of 5-7 years and currently total order book stands at Rs76,990mn which provides strong revenue visibility for next couple of years. Management iterated 25% CAGR over next 2-3 years, owing to its strong product pipeline.

New product launches to propel growth: In 1QFY24, company commercialized 2 new molecules taking the total number of products to 55. For FY24, company plans to commercialize 10 new molecules. Currently there are more than 90+ molecules at R&D and pilot pipeline. Additionally, the company is focusing on expanding its fluorination product portfolio; management highlighted that revenue contribution from fluoro-based is expected to increase to 20% in FY24 and 30% by FY27 from current 15%.

Capex to support overall growth: Owing to strong product pipeline company announced a total capex outlay of Rs6700mn. Out of this capex, Rs2500mn capex will be used for contracts/LOI’s and rest will be used for fluorination. By the end of 1QFY24, company had spent Rs1240mn and the rest will be invested in 12 months. As on 31st March 2023, cash on the books was Rs5510mn. This coupled with strong cash flow from operations will be sufficient for capex.

Focusing on improving working capital: The inventory days had reduced from 290 in FY22 to 250 FY23. This has helped the company to improve its cash flow from operations. Further, company had highlighted that the inventory days is expected to come down to 220 in FY24.

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