Ami Organics: Unlocking Growth Potential in Q4FY24 - HOLD Recommendation Maintained

 

Ami Organics: Q4FY24 Result Review - Improved performance led by volumes: HOLD Ami Organics registered an improved sequential financial performance in Q4FY24. While revenue grew by 35% QoQ, adjusted PAT grew by 50% QoQ. Gross margins stood at 40% as against a usual run rate of 43-44%. EBITDA margins stood at 19% registering a sharp improvement of 330 bps QoQ. Lower gross margins were on account of price erosion and higher sale of low margin products namely specialty chemicals and domestic pharma intermediate sales. The management has raised revenue growth guidance from 17-22% to 20-25% for FY25. We raise our FY25/FY26 PAT by 30%/3% to factor in the same.We maintain our HOLD rating with revised target price of Rs 1,200 (Previous TP: Rs 1,134) assigning a target multiple of 37x on FY26 EPS. Revenue guidance raised for FY25:  The management has raised its revenue growth guidance from 17-22% to 20-25% for FY25 on the back of strong pipeline for the advanced pharmaceutical intermediates business and expectations of healthy volume growth. Pricing for the intermediates seems to have stabilized after 2-3 quarters of price erosion. The company enivisages capex of Rs ~2.5bn in FY25 catering to balance funding of Ankleshwar plant, electrolyte additives business, captive solar plant and maintenance capex Valuation & Outlook:  The Company has registered an improved performance and also raised revenue guidance. Sharp margin improvement is commendable however sustainability of the performance will be a key monitorable. Ramp up of Fermion orders and further orders wins from leading pharma customers/innovators will be strong growth catalysts for the core pharma intermediates business