From June 3, (it's listing day), the stock has risen 41 percent till date. The stock listed at a premium to its issue price and was locked in a 10-percent upper circuit throughout the day, the only stock to do so on a listing day in 2022.
The ₹808-crore IPO of the company was subscribed 6.26 times during its public offer. Aether Industries Limited manufactures and sells advanced intermediates and specialty chemicals in India and internationally. It is focused on producing advanced intermediates involving complex and differentiated chemistry and technology core competencies. It serves pharmaceutical, agrochemical, material science, coating, high-performance photography, additive, and oil and gas industries.
Adding on to the strong performance of the stock, brokerage house HDFC Securities initiated coverage on the stock with a 'buy' call. The brokerage has a target price of ₹1,045 for the stock. This indicates a 62 percent potential upside from its issue price of ₹642 and a 6 percent upside from the current levels.
As per the brokerage, Aether is more than doubling its manufacturing capacity by 2023-end. Augmentation of capacity will not only allow it to fulfill the demand of the existing and potential customers for existing products but also provide an opportunity to launch new products, HDFC pointed out.
Business Model
"Aether Industries Ltd has a technology-oriented business model and it sells innovations in chemistries and technologies. Competencies in eight chemistries and eight technologies have enabled the company to successfully build all three of its business verticals—large-scale manufacturing, contract manufacturing and contract research and manufacturing services (CRAMS)—in less than six years of operation," the brokerage said in its report.
The brokerage further highlighted that Aether’s business model compels it to regularly launch products and add competencies. Moreover, the firm is tripling its research and development (R&D) infrastructure and strengthening its team size which will support its growth pace, said HDFC.
Market leadership
As per the brokerage, in the eight major products that contributed 75 percent to the revenue in FY22, Aether is a market leader globally for four products and the second-largest producer globally for two products.
The company has achieved these market positions by developing differentiated processes with the use of its core competencies of
chemistry and technology, it said. The market opportunity for eight of their major products is ₹3,750 crore in CY25 and HDFC believes, owing to its market leadership position in these products, the company is well-positioned to capitalise on market opportunities.
Loyal customers
The brokerage further pointed out that Aether has a loyal customer base of over 188 multinational, regional and domestic pharmaceutical, agrochemical, material science, oil & gas and textile companies.
Top-20 customers contributed 73 percent to the total revenue in FY22 and the firm has a relationship in excess of five years with 70 percent of customers, it added. These enduring customer relationships have helped Aether expand its product offerings and geographic reach, added HDFC.
HDFC expects EBITDA and PAT CAGRs of 43 percent and 45 percent, respectively for the firm over FY22-25E.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
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