KR Choksey has given Buy recommendation for Rossari Biotech with a target price of Rs. 1252 in its research report issued on May 24, 2022

KR Choksey’s research report on Rossari Biotech

Rossari’s consolidated revenue grew by +101% yoy / +2.5% qoq at INR 4,389Mn in line with our estimates of INR 4,331Mn (+1% up). In FY22, revenue grew by 109% yoy basis at INR 14,830Mn. EBITDA grew by 48.6% yoy / 9.6% qoq at INR 523Mn ahead of our estimates of INR 500Mn (+5% up). EBITDA margin de-grew by 422bps yoy basis at 11.9% in Q4FY22; however, there was a sequential growth of 77bps. In FY22, EBITDA reported at INR 1,834Mn (49% yoy) and EBITDA margin reported at 12.4% (-497bps yoy). PAT stood at INR 241Mn (+8.4% yoy / 5.6% qoq) slightly below our estimates of INR 250Mn (down 4%). PAT margin reported at 5.5% (-480bps yoy / +17bps qoq). In FY22, PAT grew by 22.0% yoy at INR 977Mn and net margin reported at 6.6% (-470bps yoy). Diluted EPS stood at INR 4.35 in Q4FY22 and INR 17.70 in FY22.

Outlook

Currently, the stock is trading at TTM PE multiple of ~50x at CMP of INR 887/share. The stock has corrected by ~35% in last 6 months amid reduction in margins on account of rising costs of raw material, power, freight and transport costs along with lower market sentiments in the current market volatility. We revise our target price downwards at INR 1,252/share (P/E multiple 30x to FY24 EPS) and maintain our BUY recommendation on the stock with an upside of 41.1%.

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