The brokerage has said in a note that “Jubilant Ingrevia (‘Ingrevia’) have initiated new capex programme with focus shifting towards non commoditised segments of Spec. Chem and Nutrition business. Of the previously announced INR 900crs capex and the additional capex of INR 1250crs, 60% of the amounts are committed towards Spec Chem. Peak Sales potential post capex is INR 9500crs (~2x of FY22 sales) as per the company. CDMO can drive the overall spec chem revenues as it capitalises on multiple niche technology platforms already in incubation. With ramp up of food grade acetic acid plant getting live, Chemical Intermediates should see decreased volatility and the blended margins should improve as well. We strongly believe Ingrevia can grow on FY22 base, on the back of the new capex initiatives commercialising over FY23 and FY24. Currently, the company is attractively placed at ~6x payback period in terms of the cash profit of FY25E which gives an attractive reward potential at the CMP with limited Downside risk."
Considering the speciality chemical business, the brokerage has said the company’s chemical intermediates revenues were impacted due to Acetic Acid prices (INR 54crs in Q4FY22 Inventory loss) however the segment sales grew by ~60% YoY while Spec chem and Nutrition revenues grew by ~24% and ~22% YoY respectively in FY22. Commercialisation of Diketene, Agro-active and CDMO facility can significantly improve the overall profile of Ingrevia to a specialty focused organisation leading to a better margin profile for the business. CDMO as per us will be a significant growth area for Ingrevia’s Spec Chem segment.
The brokerage has claimed that “Ingrevia had previously announced a capex of ~ INR 900Crs and in Q4FY22 announced an additional capex of INR 1250crs. Both these capex programs largely focus on Speciality Chemicals business with ~60% of the funds committed to the same. We believe as these new projects that Ingrevia is foraying into come in the play the contribution from nutrition and Speciality chemicals would increase to ~51% by FY25E as compared to 44% in FY22. With majority revenue contributions shifting to non commoditised segments of Speciality Chemicals and nutrition the EBITDA Contributions from the segments will also increase to ~63% in FY25E as compared to~53% in FY22. We believe that Incremental revenue growth with the commencement of new facilities coupled with increased contribution from the non commoditised business would lead to a better quality and more stabilised margin profile."
“We expect Ingrevia’s operating profitability to sustain and increment over the near to medium term, given its expanding portfolio of value-added products, and a favorable pricing scenario in the nutrition and Spec chem segments. Currently, the company is attractively placed at ~6x payback period in terms of the cash profit of FY25E which gives an attractive reward potential at the CMP with limited Downside risk. We thus arrive at our Mar-23 TP of INR 890 valuing Ingrevia at 12x FY24E EV/EBITDA," said Monarch Networth Capital Ltd (MNCL).
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
