Hold Laxmi Organic Industries, target price Rs 335: Prabhudas Lilladher

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Hold Laxmi Organic Industries, target price Rs 335:  Prabhudas Lilladher


Prabhudas Lilladher has hold call on with a target price of Rs 335. The current market price of Laxmi Organic Industries is Rs 342.55.

Laxmi Organic Industries, incorporated in the year 1989, is a small cap company (having a market cap of Rs 9106.02 Crore) operating in General sector.

It’s key products/revenue segments include chemicals, others, jobwork and spares, coal, scrap, export incentives, other operating revenue for the year ended March 31, 2022.




Financials

For the quarter ended June 30, 2022, the company has reported a consolidated total income of Rs 758.73 crore, down 13.95 per cent from last quarter total income of Rs 881.77 crore and up 2.44 per cent from last year same quarter total income of Rs 740.62 crore. Company has reported net profit after tax of Rs 64.88 crore in latest quarter.

The company’s top management includes Mr.Ravi Goenka, Mr.Satej Nabar, Mr.Harshvardhan Goenka, Mr.Rajeev Goenka, Mr.O V Bundellu, Mr.Manish Chokhani, Ms.Sangeeta Singh, Dr.Rajeev Vaidya. Company has Natvarlal Vepari & Co. as its auditors. As on June 30, 2022, the company has a total of 27 crore shares outstanding.

Investment Rationale

The brokerage initiates coverage on Laxmi Organic Industries (LXCHEM) with ‘HOLD’ rating at SOTP based target price of Rs335 (implied consol Sep’24EEV/EBITDA of 17x and PE of 25x).

While SI revenue visibility increases through long term contracts from global majors, FI business faces time and cost overruns, and is likely to scale up gradually once commissioned in H2FY23. Acetyls and Specialty intermediates (AI & SI) will remain LXCHEM’s core businesses in the medium term, while Fluorochemicals will be a long term earnings driver.

The brokerage believes, EBITDA contribution from higher value segments(SI+FI) will increase to ~70% by FY25E from ~55% in FY22 as SI EBITDA grows at ~22% CAGR and FI earnings commence in H2FY23. AI (commoditised business) to witness moderate EBITDA growth of ~5% CAGR over FY22-25E (on realisation and margin normalisation from elevated base of FY22),despite healthy volume growth driven by YCPL acquisition and debottlenecking.

While it likes LXCHEM’s stronghold in both AI and SI business, they believe that FI scale up will be gradual, while most positives are factored in its valuations. Initiate ‘HOLD’.

Promoter/FII Holdings
Promoters held 72.53 per cent stake in the company as of June 30, 2022, while FIIs owned 0.6 per cent, DIIs 3.22 per cent.

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