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Laxmi Organic IPO Financial Analysis (Subscribe for Long Term)

Laxmi Organic IPO  Fundamental Analysis

Business Profile

Incorporated in the year 1989, Laxmi Organics is a leading manufacturer of Acetyl Intermediates and Specialty Intermediates. The products manufactured find application in various high-growth industries, including pharmaceuticals, agrochemicals, dyes & pigments, inks & coatings, paints, printing & packaging, flavors & fragrances, adhesives, and other industrial applications.

The company has a global reach with customers in more than 30 countries including China, Netherlands, Russia, Singapore, United Arab Emirates, the United Kingdom, and the United States of America. Customers in the pharmaceutical segment include marquee names like Alembic Pharmaceuticals Limited, Dr. Reddy's Laboratories Limited, Hetero Labs Limited, Laurus Labs Limited, Macleods Pharmaceuticals Private Limited, Mylan Laboratories Limited among others.

The company has two manufacturing facilities in Mahad, Maharashtra with one facility dedicated to Acetyl Intermediates (installed production capacity at 161,320 MTPA) and another dedicated to Specialty Intermediates (installed production capacity at 78,045 MTPA)  which are strategically located in proximity to several ports and each other.

The company is in the process of setting up the Proposed Facility in Lote Parshuram, Maharashtra for manufacturing fluorospecialty chemicals which are proposed to commence operations by the fourth quarter of Fiscal 2022.

Laxmi Organic Financial Review

Laxmi Organics posted total revenues of Rs 814.36 crore for the six months ended 30th Sept 2020 against PAT of Rs 45.48 crore. The revenue for FY20 reduced by 2.27% to Rs 1538.62 crore from Rs 1574.32 crore in FY19 because of fall in selling prices of the products manufactured. PAT was Rs 70.21 crore for FY20 as compared to Rs 72.39 crore for FY19. Operating and the net margins are quite volatile as can be seen from the table below.

Return on net worth has been decent at 16.45% for FY20. Debt to equity has been low at 0.31 for FY20.

Table 1 - Laxmi Organic Financials and Ratios (Amount in INR Crore)
Title 30-Sep-20 FY20 FY19 FY18
Total Revenue 814.36 1538.62 1574.32 1396.08
PAT 45.48 70.21 72.39 75.70
EBITDA 86.34 118.05 158.62 154.41
Total Assets 1037.13 1070.63 1014.49 894.73
Cash and Bank 81.58 44.71 46.74 5.24
Cash generated from operations 46.29 211.51 215.24 20.62
EBITDA Margin 10.60% 7.67% 10.08% 11.06%
Net Margin 5.58% 4.56% 4.60% 5.42%

Valuation and peer comparison

At annualised EPS of 4.04 per share P/E is 32.18x at upper price band of Rs 130 per share which indicates that the IPO is fully priced. P/BV comes at 6.19x with NAV at Rs20.99 per share at upper price band. Average P/E for the sector is 30x.

One can see the peers and the peer related key financial data from the table below.

Table 1 - Laxmi Organic Valuation and peer comparison
Particulars Aarti Industries Atul Limited Fine Organic Industries Navin Flourine International Rossari Biotech SRF Limited Laxmi Organics
Face Value per share 5 10 5 2 2 10 2
Total Income for FY20 (INR Cr) 4,620.7 4,093.06 1,038.08 1,061.55 600.09 7,209.41 1,534.12
EPS 30.77 224.69 53.75 82.53 13.42 177.29 2.86
NAV per share 170.96 1063.63 201.86 285.46 56.49 858.26 18.97
Return on net worth 18.00% 21.12% 26.63% 28.42% 7.88% 20.66% 16.45%
P/E 24.92 17.75 35.46 14.68 70.45 15.7 -
CMP as on March 12, 2021 1284 6784 2382 2667 989 2783 -

Future Outlook and Conclusion

Laxmi organic is a leading manufacturer of Aceytal Intermediates and Speciality Intermediates. The company has a diversified base of customers and has established its global footprint in over 30 countries. The Company plans to grow by expanding its installed capacity and also by diversifying into the manufacturing of specialty fluorochemicals.

The company has decent financial numbers over the last three years and also proposes to expand its operations. The sector has high entry barriers due to the complexity of products. Global operations demonstrate low geographical concentration. Hence, one may consider subscribing to the IPO for the long term.

Reviewer recommends Subscribe for Long Term to the issue.

Review By CA Priyanka Choudhary on 6th Mar 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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