Ami Organics Ltd.

RESULT UPDATE 23rd November 2023

 India Equity Institutional Research II Result Update – Q2FY24 II 23rd November 2023

Ami Organics Ltd. Delayed launches and increased hiring impact the margins

CMP Target Potential Upside Market Cap (INR Mn) Recommendation Sector
INR 1,096 INR 1,225 11.7% INR 40,274 ACCUMULATE Pharmaceuticals

Result Highlights of Q2FY24:

• Ami Organics consolidated revenue for Q2FY24 stood at INR 1,724 Mn, registering a growth of 17.3% YoY and 12.1% QoQ, despite downward pricing pressures, led by
healthy growth in specialty chemical business on a low base.
• Adj EBITDA for the quarter came at INR 248 Mn, reporting a decline of 11.8% YoY/ 27.0% QoQ, while Adj EBITDA margins for Q2FY24 stood at 14.4%, a contraction of 474
bps on a YoY basis (-772 bps QoQ) owing to raw material expenses and employee costs.
• Adj Net Profit for Q2FY24 stood at INR 147 Mn, reporting a de-growth of 22.6% YoY/ 33.7% QoQ on the back of lower operating performance during the quarter. Adj. NPM
stood at 8.5%, which showed a decline of 592 bps on a QoQ basis and 440 bps YoY. The Company reported a loss of INR 170 Mn during the quarter on the back of a one-
time exceptional hit taken by the Company.
• The advanced intermediates segment continued to see pricing pressure that impacted sales growth in Q2FY24. The management has lowered its guidance of growing
the overall revenues by 18.0-22.0% in FY24E from earlier guidance of 22.0-25.0%.

MARKET DATA KEY FINANCIALS

Shares outs (Mn) 36 INR Millions FY 21 FY 22 FY 23 FY 24E FY 25E

Mkt Cap (INR Mn) 40,274 Revenue 3,406 5,201 6,167 7,432 9,141
Adj EBITDA 802 1,052 1,226 1,434 1,856
52 Wk H/L (INR) 1,389/ 847
Adj PAT 540 719 833 931 1,190
Volume Avg (3m K) 54
Adj. EPS (INR) 17.1 21.0 22.9 25.2 32.3
Face Value (INR) 10
Adj EBITDA Margin (%) 23.5% 20.2% 19.9% 19.3% 20.3%
Bloomberg Code AMIORG IN
Adj. NPM (%) 15.9% 13.8% 13.5% 12.5% 13.0%
Source: Company, KRChokseyResearch

SHARE PRICE PERFORMANCE Revised revenue guidance downwards for FY24E:

170 In Q2FY24, the Specialty chemicals segment witnessed revenue growth of 71.4% YoY to INR 378 Mn. The Advance
Intermediates (API) segment reported an increase of 7.7% YoY to INR 1,346 Mn. The advanced intermediates
150 segment continued to see pricing pressure that impacted sales growth in Q2FY24. AMIORG saw a delay in its key
product launch due to uncertainty from the customer’s end, which is expected to be realized by Q4FY24E or early
Q1FY25E. The Company has also extended its partnership with Fermion, where the Company has a total of 3
130
advanced intermediate products in its kitty and is expected to add considerable revenue in coming quarters. The
specialty chemical segment continues to see a healthy pipeline with one product launched this quarter, Viz, the UV
110 absorber for the paint industry. The Company expects to see a contribution in sales from this product from Q3FY24E
onwards. The management has lowered its guidance of growing the overall revenues by 18.0-22.0% in FY24E from
90 earlier guidance of 22.0-25.0% because of deferment in product launches in specific markets by customers and
pricing pressure due to oversupply from China.
70
Margins to improve on a sequential basis :
50 The Gross margin for the quarter was at 41.0% vs 48.0% in Q2FY23 (vs 47.9% in Q1FY24). The decline in gross margins
was on account of high price erosion and higher sales of low-margin products. EBITDA for the quarter stood at INR
Nov-22
Nov-21

Apr-22

Apr-23

Nov-23
Sep-21

Sep-22

Sep-23
Jun-22

Jan-23

Jun-23
Feb-22

248 Mn, down 11.8% YoY/ 27.0% QoQ. EBITDA margin for the quarter was at 14.4%, a contraction of 474 bps YoY/ 772
bps QoQ on account of lower gross margins as well as higher employee cost, which was driven by annual
increments, ESOP and hiring for the Ankleshwar unit. Adjusted PAT (excluding the exceptional expenses) for the
Ami Organics Sensex quarter was INR147 Mn, down 22.6% YoY/ 33.7% QoQ. The Company has reported an exceptional expense of INR 318
Mn, which led to a loss of INR 170 Mn in Q2FY24. AMIORG has fully impaired the existing investment of the Company
in the joint venture Ami Oncotheranostics LLC. Thus, the same has been shown as an exceptional item.
MARKET INFO
Update of acquisitions and Capex plans:
On the capex plan of the Ankleshwar unit, machinery installation is in progress in block 1, and the Company has started
SENSEX 66,023 the recruitment process for the new facility. It is on track to commence the production activity in Q4FY24E. AMIORG
completed the acquisition of a majority partnership (55.0%) stake in Baba Fine Chemicals during the quarter.
NIFTY 19,812

SHARE HOLDING PATTERN (%)

Particulars (%) Sep-23 Jun-23 Mar-23

Promoters 38.9 39.4 39.4

FIIs 7.2 6.7 6.4 21.7% 19.5%

DIIs 5.9 5.1 3.6

Others 48.0 48.7 50.6 Revenue CAGR between FY23 Adj. PAT CAGR between FY23
Total 100 100 100 and FY25E and FY25E

RESEARCH ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Unnati Jadhav, research5@krchoksey.com, +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
 India Equity Institutional Research II Result Update – Q2FY24 II 23rd November 2023

Ami Organics Ltd.

Key Concall Highlights:
• Despite persistent higher levels of inflation, there are emerging signs of inflation rates cooling in the coming quarter. Traditionally, a resurgence in demand is
occurring in a wave of growth, which bodes well for the global economic outlook.
• There remains a consistent oversupply from China across the chemical value chain. This has led to a decline in raw material costs, exerting downward pressure on
the pricing of the finished goods across the industry.
• Chinese production continues to outpace demand.
• The industry is starting to see a promising contraction in demand and supply gap. Consequently, there is a cautious stabilization in raw material prices. This external
environment did have some impact on Ami Organics' performance for the quarter.
• The launch of one of its key products in advanced pharmaceutical intermediates has been delayed by its customers, thereby impacting this quarter's growth.
However, this is only deferred revenue that is expected to be realized in either Q4FY24E or Q1FY25E. This is one of the reasons for lower margins for the quarter, as
this is a very high-margin product.
• On the Fermion deal, the Company has further extended the partnership with Fermion by adding one more advanced intermediate to its basket. Currently,
AMIORG has a total of 3 advanced intermediates for their product, which increases the total expected revenue considerably from this CDMO contract.
• For the previously signed advanced intermediates, the Company has already received the order, and it will start shipping them out from the Ankleshwar facility in
Q4FY24E. This will gradually translate to the revenue starting from Q4FY24E.
• Coming to the specialty chemicals business, the Company has introduced one more product, UV absorber, for the paint industry. AMIORG will see revenue from
this product coming into the numbers from Q3FY24E onwards. For the existing products, the volume growth was good, but pricing pressure continued to be there.
Overall, the specialty chemicals business still delivered a strong 72% growth on a YoY basis.
• The Company continues negotiations with prospective customers in the electrolyte additive business.
• AMIORG completed the Baba Fine Chemicals' acquisition of a controlling partnership during the quarter. The firm is set to be succeeded by the newly incorporated
entity, Baba Advance Materials Limited. The majority of H1FY24 was dedicated to completing the acquisition, followed by an integration process that, to some
extent, impacted the operations of Baba Fine Chem. Despite these operational challenges, the Company is committed to preserving last year's revenue, and it is
poised for exponential growth in the forthcoming years.
• The Board of Directors have approved a 16-megawatt captive solar power plant project entailing a CAPEX of somewhere around INR 650 Mn to INR 700 Mn. The
new 16-megawatt solar power plant is in addition to the already work-in-progress 5-megawatt solar power plant.
• The deferment in product launches in certain markets by customers coupled with pricing pressure due to oversupply from China is expected to have some impact
on the numbers. However, AMIORG expects to deliver a robust H2FY24E; overall, it is modifying its growth target from 22.0% to 25.0% for the full year to 18.0% to
22.0% growth from FY24E.
• JV with Ami Oncotheranostics was fully impaired on the grounds that it would take significant time to generate revenue due to the inherent long-term nature of its
research activity and uncertain success rate, which resulted in negative PAT for the quarter. Adjusting for the impairment, PAT for the quarter Q2FY24 was at INR
147 Mn.
• Coming to working capital for H1FY24, improvement in debtor days and better payable cycle helped ease its working capital, leading to net working capital days of
100 days, an improvement of 16 days over March 31, 2023.

Valuation and view:

Ami Organics reported a mixed performance in Q2FY24 with healthy revenue growth, lower margins due to the product mix, and higher operating expenses due to
increased spending related to new units and acquisition. The Company will continue to focus on developing innovative products for the global markets, which will help in
maintaining its historical growth rates in coming quarters. The specialty chem business is expected to grow faster than the core pharma intermediate business due to a
lower base, development, and entry into new molecules to accelerate growth. The Company continues to work on improving operational efficiencies to deliver better
margins. Currently, it is trading at 42.3x/ 33.8x on FY24E/25E Adj. EPS. We are assigning a P/E multiple of 38x to its FY25 estimated adj. EPS of INR 32.3 to arrive at a
revised target price of INR 1,225 per share (earlier INR 1,305), an upside of 11.7% over the CMP, with an “ACCUMULATE” rating on the stock.

Segmental mix and the Share of Top customers:

120%
Revenue- By Business Verticles Share of Top Customers for FY23
70%

58%
100%

3% 5%
16%
60%

18%
80%
50% 44%
60%
40%
33%
97% 95% 30%

40%
82% 84%
20%

20%

10%

0%
0%

FY20 FY21 FY22 FY23 Top 3 Top 5 Top 10

Pharma Intermediates Specialty Chemicals

Performance at Glance
22.4% 21.9% 22.1%
2000

21.2% 20.3% 1724

25.0%

19.1%
17.9% 17.6%
1863
1500 20.0%

1524 1537 14.4%

1223
1000
1412 1435 1310 1470 15.0%

299 309 408 340

500
274 257 230 281 248 10.0%

175 195 212 149 190 223 272 222

0 5.0%

-170
-500 0.0%
Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23

Q3FY23

Q4FY23

Q1FY24

Q2FY24

Revenue EBITDA PAT EBITDA Margins

Source: Company, KRChokseyResearch

RESEARCH ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Unnati Jadhav, research5@krchoksey.com, +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
 India Equity Institutional Research II Result Update – Q2FY24 II 23rd November 2023

Ami Organics Ltd.

KEY FINANCIALS
Exhibit 1: Profit & Loss Statement

INR Millions FY 21 FY 22 FY 23 FY 24E FY 25E

Revenues 3,406 5,201 6,167 7,432 9,141

COGS 1,749 2,823 3,459 4,310 5,119

Gross profit 1,609 2,473 2,858 3,270 4,205

Employee cost 210 414 488 557 686

Other expenses 598 1,008 1,144 1,278 1,664

EBITDA 802 1,052 1,226 1,434 1,856

EBITDA Margin 23.5% 20.2% 19.9% 19.3% 20.3%

Depreciation & amortization 42 101 123 149 183

EBIT 760 951 1,103 1,286 1,673

Interest expense 56 64 24 37 64

Other income 14 28 43 44 45

PBT 717 915 1,122 1,293 1,653

Tax 177 195 289 362 463

Exceptional item 0 0 0 318 0

PAT 540 719 833 613 1,190

Adj. PAT 540 719 833 931 1,190

EPS (INR) 17.1 21.0 22.9 16.6 32.3

Adj. EPS 17.1 21.0 22.9 25.2 32.3

Source: Company, KRChokseyResearch

Exhibit 2: Cash Flow Statement

INR Millions FY 21 FY 22 FY 23 FY 24E FY 25E

Net Cash Generated From Operations 280 (87) 655 419 797

Net Cash Flow from/(used in) Investing Activities (1,012) (1,240) (330) (1,434) (549)

Net Cash Flow from Financing Activities 721 1,403 (123) 939 (83)

Net Inc/Dec in cash equivalents (11) 76 202 (76) 166

Opening Balance 38 27 103 305 229

Closing Balance Cash and Cash Equivalents 27 103 305 229 395

Source: Company, KRChokseyResearch

Key Ratio FY 21 FY 22 FY 23 FY 24E FY 25E

EBITDA Margins (%) 23.5% 20.2% 19.9% 19.3% 20.3%

Net Profit Margin (%) 15.9% 13.8% 13.5% 8.3% 13.0%

RoE (%) 32.4% 13.8% 14.0% 9.4% 15.4%

RoCE (%) 21.8% 13.6% 13.8% 8.6% 14.4%

RoA (%) 13.1% 10.9% 10.9% 6.3% 10.5%

Debt/Equity 2.3 0.0 0.0 1.2 1.2

Source: Company, KRChokseyResearch

RESEARCH ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Unnati Jadhav, research5@krchoksey.com, +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
 India Equity Institutional Research II Result Update – Q2FY24 II 23rd November 2023

Ami Organics Ltd.

Exhibit 4: Balance Sheet

INR Millions FY 21 FY 22 FY 23 FY 24E FY 25E

Non-current assets
Property, plant and equipment (PPE) 1,606 1,584 1,844 2,220 2,586
Capital work-in-progress 2 30 255 920 920
Right of use assets 0 194 374 393 393
Investment property 14 17 17 17 17
Intangible assets 257 267 211 78 78
Goodwill 0 0 203 561 561
Financial assets
Investments 14 17 17 17 17
Loans 27 109 62 62 62
Other noncurrent financial assets 321 1,377 856 1,214 1,264
Total noncurrent assets 1,970 2,293 2,969 4,257 4,623
Current assets
Inventories 604 1,122 1,192 1,405 1,728
Financial assets
Trade receivables 1,207 1,637 2,303 2,647 3,256
Cash and cash equivalents 27 103 305 229 395
Loans 3 7 13 16 19
Current tax assets (net) 0 49 32 39 46
Other current assets 322 485 574 914 914
Total current assets 2,162 4,295 4,701 5,549 6,708
TOTAL ASSETS 4,133 6,588 7,669 9,806 11,331

EQUITY AND LIABILITIES

Equity
Equity share capital 315 364 364 364 364
Other equity 1,354 4,858 5,575 6,188 7,379
Total equity 1,669 5,222 5,940 6,553 7,743
Liabilities
Non-current liabilities
Financial liabilities
Borrowings 726 6 6 429 438
Provisions 44 4 7 10 10
Deferred tax liabilities (Net) 33 63 88 98 98
Total non-current liabilities 803 73 101 537 546
Current liabilities
Financial liabilities
Borrowings 445 3 30 583 555
Trade payables 844 1,184 1,420 1,751 2,104
Other financial liabilities 198 0 0 0 0
Other current liabilities 152 46 64 244 244
Provisions 10 60 114 138 138
Current tax liabilities (Net) 12 0 0 0 0
Total current liabilities 1,660 1,293 1,628 2,716 3,041
Total liabilities 2,463 1,366 1,730 3,254 3,588
TOTAL EQUITY AND LIABILITIES 4,132 6,588 7,669 9,806 11,331

Source: Company, KRChokseyResearch

RESEARCH ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Unnati Jadhav, research5@krchoksey.com, +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
 India Equity Institutional Research II Result Update – Q2FY24 II 23rd November 2023

Ami Organics Ltd.

Ami Organics Ltd. Rating Legend (Expected over a 12-month period)

CMP
Date TP (INR) Recommendation Our Rating Upside
(INR)
23-Nov-23 1,096 1,225 ACCUMULATE Buy More than 15%
12-Aug-23 1,247 1,305 ACCUMULATE
Accumulate 5% – 15%
15-May-23 1,136 1,305 ACCUMULATE
7-Feb-23 908 1,229 BUY Hold 0 – 5%

7-Nov-22 999 1,229 BUY

Reduce -5% – 0
12-Aug-22 1,029 1,229 BUY
19-May-22 960 1,229 BUY Sell Less than – 5%

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Date: 2023.11.23
JADHAV 16:51:34 +05'30'

RESEARCH ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Unnati Jadhav, research5@krchoksey.com, +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
www.krchoksey.com
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