“In the third quarter of the fiscal year 2023-24, Anupam Rasayan witnessed a significant decline in revenue, dropping by 24.6% year-on-year and also quarter-on-quarter to INR 2,955 million. This decrease was primarily attributed to reduced volume as customers focused on liquidating their inventory. Over the first nine months of the fiscal year, the company’s revenue also saw a decline of 4.3% year-on-year, amounting to INR 10,741 million.The EBITDA for the quarter also experienced a notable decline, decreasing by 28.9% year-on-year and 26.4% quarter-on-quarter to INR 791 million. This decline in EBITDA was primarily due to increased employee costs, higher other expenses, and a sharp drop in revenue. Consequently, the corresponding EBITDA margin contracted by 162 basis points year-on-year and 65 basis points quarter-on-quarter to 26.8%. Over the first nine months of the fiscal year, EBITDA declined by 10.2% year-on-year to INR 2,880 million, and the EBITDA margin contracted by 177 basis points year-on-year to 26.8%.Profit after tax (PAT) witnessed a substantial decline of 57.1% year-on-year and 54.8% quarter-on-quarter to INR 184 million in the third quarter. This decline was primarily due to weak operating performance, coupled with an increase in interest expense and depreciation. Over the first nine months of the fiscal year, PAT declined by 21.3% year-on-year to INR 977 million, with the PAT margin contracting by 197 basis points year-on-year to 9.1%.
Despite short-term weak demand resulting from global de-stocking, it is anticipated to gradually normalize in the upcoming quarters, with recovery expected to commence by the third quarter of the fiscal year 2025. The growth drivers moving forward include the pharma segment, polymers, and the Japanese market business.Currently, the stock is trading at a price-to-earnings (PE) multiple of 46.1x and 31.7x based on estimated earnings per share (EPS) for fiscal years 2025 and 2026, respectively. Introduction of fiscal year 2026 estimates expects a compound annual growth rate (CAGR) of 13.7% in revenue and 18.8% in corresponding adjusted PAT from fiscal year 2023 to fiscal year 2026. By applying a PE multiple of 35.0x to the estimated EPS for fiscal year 2026 of INR 28.8, the target price is arrived at INR 1,008 (previously INR 990). Accordingly, the rating on the stock is maintained as ACCUMULATE, with a potential upside of 10.41%.”