Expanding Pharma And Polymer Segments To Drive Future Success

Key Takeaways

• Pharma and Polymer growth, energy cost cuts, and a robust pipeline with new molecules will drive future revenue growth and improve net margins.
  
• Strengthened fluorination chemistry portfolio targets Japan and U.S. partnerships, boosting international sales and earnings significantly.
  
• Weak agrochemical demand, collection challenges, inventory inefficiencies, and loss of a key client threaten financial stability despite diversification into pharma and polymers.

Catalysts

Engages in the custom synthesis and manufacturing of specialty chemicals in India, Europe, Japan, Singapore, China, North America, and internationally.

• The Pharma and Polymer segments have become significant growth drivers for Anupam Rasayan, with expected continued increases in their revenue contributions through FY '26, impacting overall revenue growth positively.
  
• The company projects a 30% to 35% revenue increase in FY '26, supported by a rebound in agrochemical demand, which had previously been weak, particularly in Europe. This is expected to enhance revenue and potentially EBITDA margins.
  
• Anupam Rasayan's investment in green energy initiatives, including a 9.2-megawatt hybrid power plant, is anticipated to reduce annual energy costs significantly, thereby improving net margins.
  
• The company has a strong pipeline of molecules in R&D stages, with 65-plus new molecules across pharma and polymers expected to drive future revenue growth as they reach commercialization.
  
• Anupam Rasayan has strengthened its fluorination chemistry portfolio, with ambitious sales targets in Japan and new contracts with U.S. multinational corporations, potentially boosting international sales and earnings over the next 2 to 3 years.

Anupam Rasayan India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Anupam Rasayan India's revenue will grow by 29.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.9% today to 17.2% in 3 years time.
• Analysts expect earnings to reach ₹5.0 billion (and earnings per share of ₹46.06) by about March 2028, up from ₹796.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.4x on those 2028 earnings, down from 107.6x today. This future PE is lower than the current PE for the IN Chemicals industry at 23.9x.
• Analysts expect the number of shares outstanding to decline by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.97%, as per the Simply Wall St company report.

Anupam Rasayan India Future Earnings Per Share Growth

Risks

• The agrochemical sector has faced weak demand, especially from Europe, which has negatively impacted revenues and could continue to pose a risk if the anticipated improvement does not materialize.
  
• The company's historical revenue growth rate has been lower than the growth rate of trade receivables, suggesting potential challenges in collecting payments, which could impact liquidity and net margins.
  
• High levels of inventory relative to sales suggest working capital inefficiencies, which could strain cash flows and limit the company's ability to finance new growth initiatives internally.
  
• The exit from a large Indian MNC customer contributing 15% to total revenues indicates a possible loss of a significant revenue stream, affecting overall sales and earnings.
  
• Although there is expansion into pharma and polymer sectors, reliance on launching new molecules implies execution risk in R&D and commercialization, potentially affecting the timely realization of projected revenue growth.

Valuation

• The analysts have a consensus price target of ₹723.375 for Anupam Rasayan India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1075.0, and the most bearish reporting a price target of just ₹520.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹29.0 billion, earnings will come to ₹5.0 billion, and it would be trading on a PE ratio of 23.4x, assuming you use a discount rate of 14.0%.
• Given the current share price of ₹779.85, the analyst price target of ₹723.38 is 7.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.