Target: ₹1,040

CMP: ₹866.75

Anupam Rasayan is well-positioned to benefit from 'China + 1' with its diversified chemistry expertise, wide customer base and presence across multiple verticals.

Strong LT contract pipeline offers medium-term growth visibility. We forecast Rev/ EBITDA/PAT CAGR of 33%/29%/31% over FY22-24. Valuation is favorable after a 16 per cent correction. We initiate at Buy with a ₹1,040 price target at 38x P/E on accelerating earnings growth and upside potential from new contract wins.

China's climate goals have impacted the smooth functioning of its chemical industry. The CSM (custom synthesis and manufacturing) revenue CAGR of Indian players (35 per cent over FY18-21) has outstripped their Chinese counterparts (16 per cent), suggesting market share gains.

No single chemistry contributes more than 12 per cent of ARIL's revenues. It has developed expertise in continuous flow chemistry (lower cost and greener compared to batch process) and has migrated 30 per cent of its manufacturing to this platform.

ARIL derives 35 per cent of its revenues from its top 3 customers and 82 per cent from the top 10, reducing the risk from potential loss of any customer. It provides CSM services to agro chem, personal care, pharma, pigments and dyes verticals, which diversifies its revenue streams. This reduces its vulnerability to any slowdown in the global agrochemical cycle.

Contract wins of ₹820 crore and LOI of ₹1,800 crore over YTD-FY22 should add ₹420 crore to annual revenues in FY24 (over FY22 base).

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