Ami Organics Limited, Surat - Gujarat based company, is a research and development ('R&D') driven manufacturer of specialty chemicals with varied end usage, focussed towards the development and manufacturing of advanced pharmaceutical intermediates ('Pharma Intermediates') for regulated and generic active pharmaceutical ingredients ('APIs') and New Chemical Entities ('NCE') and key starting material for agrochemical and fine chemicals, especially from its recent acquisition of the business of Gujarat Organics Limited. As per the F&S Report, they are one of the major manufacturers of Pharma Intermediates for certain key APIs, including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban. The Pharma Intermediates which they manufacture, find application in certain high-growth therapeutic areas including anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant and anti-coagulant, commanding significant market share both in India and globally. Company has developed and commercialised over 450 Pharma Intermediates for APIs across 17 key therapeutic areas since inception and NCE, with a strong focus on R&D across select high-growth high margin therapeutic areas such as anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant and anti- coagulant, for use across the global pharmaceutical market. Company's Pharma Intermediates used for manufacturing of APIs and NCEs portfolio has expanded from over 425 products as of March 31, 2019, to over 450 products as of March 31, 2021. They believe that the focus on R&D and continuous process improvement has positioned them as a preferred supplier to the customers. The revenue from operations from the Pharma Intermediates business was 3,011.41 million, 2,178.83 million and 2,033.91 million respectively, for Fiscals 2021, 2020 and 2019, accounting for 88.41%, 90.92% and 85.28% of our total revenue from operations respectively, for the same periods. Company recently completed the acquisition of two additional manufacturing facilities operated by Gujarat Organics Limited which has added preservatives (parabens and parabens formulations which have end usage in cosmetics, animal food and personal care industries) and other specialty chemicals (with end usage in inter alia the cosmetics, dyes polymers and agrochemicals industries) in the existing product portfolio, which command significant market share globally in the supply of certain paraben derivatives, as per the F&S Report). The Acquisition is in line with the inorganic growth strategy of foraying further into the specialty chemicals sector. Along with the domestic market, Ami Organics supplies Pharma Intermediates used for manufacturing of APIs and NCEs to various multi-national pharmaceutical companies which cater to the large and fast-growing markets of Europe, China, Japan, Israel, UK, Latin America and the USA. In the Fiscals 2021, 2020, and 2019, the revenue from exports contributed 51.57%, 45.89% and 49.61%, respectively of the total revenue from operations. The revenues from exports have grown at a CAGR of 21.84% between Fiscals 2019 and 2021. Company supplies the products to more than 150 customers (including international customers) directly in India and in 25 countries overseas, using a distributorship network in certain cases. Some of the domestic customers include Laurus Labs Limited, Cadila Healthcare Limited and Cipla Limited and some of the key export customers include Organike s.r.l.a Socio Unico, Fermion Oy, Fabbrica Italiana Sintetici S.p.A, Chori Co. Ltd., Medichem S.A. and Midas Pharma GmbH. Thirteen of the customers have been customers since the past 10 years and fifty of the customers have been customers since the past five years. As per financial performance, ICFL has posted total income/net profits of Rs. 156.57 cr. / Rs.12.59 cr. (FY16), Rs. 160.47 cr. / Rs. 11.59 cr. (FY17), Rs.191.17 cr. / Rs. 18.66 cr. (FY18), Rs. 238.89 cr. / Rs. 24.71 cr. (FY19), Rs. 242.48 Cr . / Rs. 29.60 cr. (FY20) and Rs. 341.99 Cr . / Rs. 53.99 cr. (FY21) . So company has posted consistent growth over last couple of years. They have posted an average EPS of Rs. 12.71 and average RoNW of 29.09% for last three fiscals. Issue is priced at a P/BV of 11.40 as per NAV of 52.99 on 31.03.21. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 41. As per RHP, industry average P/E ratio is 49 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, three BRLMs are associated with this IPO, and have handled around 29 IPO in last three fiscals. From last 10 IPOs, five opened below issue price and remaining opened above issue on the day of listing. As of now, two are trading below issue price and remaining above issue price. ( As on 27.08.21) As per financials, Ami Organics has shown good results, RoNW is 32.35% and P/E is 41, which looks fully priced. Since starting of pandemic, speciality chemical sector has outperformed market and shown good growth. It's expected, sector will continue to grow at good rate in next 3-5 years. Performance of BRLM is average and below expectation listing of recent IPOs has negative effect on IPO market. But, company looks very promising and we give SUBSCRIBE rating for medium to long term.
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