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Target: ₹1,570
CMP: ₹1,053.90
Rossari Biotech’s reported operating profits at ₹46.70 crore (+37 y-o-y; +6 per cent q-o-q), stood below expectations primarily on raw material price inflation. Even though high raw material prices impacted margins, but gross margins nevertheless improved on sequential basis to 25 per cent (Q2: 22 per cent), on account of product price revisions undertaken by the company.
The robust y-o-y growth in operating profits was driven by integration of recently acquired Unitop and Tristar. Going ahead, the company, expects to see 15‐20 per cent growth in earnings, FY23 onwards.
Overall, capacity utilisation for Q3-FY22 stood at 60 per cent, with expectations of continual improvement in coming quarters, the utilisation is expected to reach 100 per cent by FY24.
Rossari has no major capex plans for next few years, and is going to undertake only maintenance capex in the range of about ₹4‐5 crore, annually.
We have revised our EPS estimate in accordance with higher amortization charge, with respect to intangibles associated with acquisition of Unitop and Tristar. Our operating earnings CAGR (FY21‐30) nevertheless stands at about 20 per cent and forms the basis of our target price.
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