Target: ₹1,335

CMP: ₹979.20

Ami Organics, with 380+ pharma intermediates approved, over 90 per cent of the drugs in the Chronic segment pipeline and some products going off-patent at regular intervals till FY37, seems future-ready to post a strong 25 per cent CAGR through CY22-30. This with growing prominence of Chronic diseases at 7.1 per cent CAGR versus 5.6 per cent for the Acute segment through CY22-30 should further prop outlook.

Expect Ami Organics to register revenue/PAT CAGRs of 27 per cent each in FY23-25 based on a revenue CAGR of 31 per cent in pharma intermediates (FY23 – 79 per cent of revenue), with the commissioning of the Ankleshwar plant, and 29 per cent CAGR for Specialty Chemicals.

We value Ami Organics on DCF, assuming a 5 per cent terminal growth rate and 11.8 per cent cost of capital, with an average EBITDA margin of 20.6 per cent in FY23-25 and 22.9 per cent EBITDA margin through FY26-33.

We initiate with a BUY and a target price of ₹1,335. Our implied target is 32.7x P/E and 21.5x FY25E EV/EBITDA. We have not factored in the electrolyte business into our valuations. Key risks are likely higher raw material cost, inability to pass it on, regulatory hurdles and evolving technology.