India Equity Institutional Research II Result Update – Q3FY24 II 31st January 2024

Laxmi Organic Industries Ltd.

Laxmi Organic
Industries Ltd

ANALYST KRChoksey Research Phone: +91-22-6696 5555,

Result update
Unnati Jadhav, [email protected], +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
www.krchoksey.com
st Fax: +91-22-6691 9576
31 January, 2024
Thomson Reuters, Factset and Capital IQ
 India Equity Institutional Research II Result Update – Q3FY24 II 31st January 2024

Laxmi Organic Industries Ltd. Subdued demand continues across end customer segments

CMP Target Potential Upside Market Cap (INR Mn) Recommendation Sector
INR 267.5 INR 271.5 1.5% INR 73,500 HOLD Specialty Chemicals

Result Highlights of Q3FY24:

• For Q3FY24, Laxmi Organic Industries revenue grew by 6.1% YoY and 6.4% QoQ to INR 6,943 Mn. We expected revenue at INR 6,841 Mn but it beat our estimates by 1.5%.
For 9MFY24, the reported revenue was INR 20,758 Mn which grew by 0.6% YoY.

• EBITDA for Q3FY24 declined by 4.6% YoY but grew 34.2% YoY to INR 523 Mn. We expected EBITDA at INR 586 Mn but it missed our estimates by 10.8% due to an increase
in employee costs and cost of goods sold. The EBITDA margin contracted by 84 bps YoY but expanded 156 bps QoQ to 7.5%. We expected EBITDA margins to be 8.6%
but it was lower by 106 bps. For 9MFY24, EBITDA declined by 8.3% YoY to INR 1,685 Mn and EBITDA margin contracted 79 bps YoY to 8.1%.

• Adj PAT for Q3FY24 declined 0.1% YoY but grew 153.8% QoQ to INR 272 Mn. We expected Adj PAT at INR 283 Mn but it missed our estimates by 3.9%. Adj PAT margin
contracted 24 bps YoY but expanded 227 bps QoQ to 3.9%. We expected Adj PAT margins to be 4.1% but it was lower by 22 bps. For 9MFY24, Adj PAT declined by 24.0%
YoY to 762 Mn, with Adj PAT margin contracting 119 bps YoY to 3.7%.

MARKET DATA KEY FINANCIALS

INR Millions FY22 FY23 FY24E FY25E FY26E
Shares outs (Mn) 275
Revenue 30,843 27,966 28,310 31,424 36,452
Equity Cap (INR Mn) 14,124
EBITDA 3,676 2,445 2,644 3,705 4,593
Mkt Cap (INR Mn) 73,500
EBITDA margin (%) 11.9% 8.7% 9.3% 11.8% 12.6%
52 Wk H/L (INR) 321/221 PAT 2,573 1,246 1,170 1,692 1,973
Volume Avg (3m K) 1,718 PAT margin (%) 8.3% 4.5% 4.1% 5.4% 5.4%

Face Value (INR) 2 EPS 9.8 4.7 4.4 6.4 7.4

Bloomberg Code LXCHEM IN P/E (x) 26.2x 54.5x 58.0x 40.1x 34.4x

Source: Company, KRChoksey Research

SHARE PRICE PERFORMANCE Growth in the top line driven by pick up in volume
For Q3FY24, Laxmi Organic Industries revenue grew by 6.1% YoY and 6.4% QoQ to INR 6,943 Mn. The essentials
400 segment reported revenue of INR 4,948 Mn which was up by 37.3% YoY and 5.4% QoQ, the specialty segment
reported revenue of INR 1,876 Mn which had a decline of 38.0% YoY but growth of 2.7% QoQ. The overall
300 contribution to revenue from Essentials increased to 72.5% in Q3FY24 against 54.4% in Q3FY23 and the overall
contribution to revenue of Specialty declined to 27.5% against 45.6% in Q3FY23. The current quarter saw the highest
volume of sales, with growth of 17.0% YoY and for 9MFY24, 19.0% YoY respectively. Moreover, the essentials
200
business segment saw improvement in the product mix with sales of new products. For 9MFY24, the reported
revenue was INR 20,758 Mn which grew by 0.6% YoY. For 9MFY24, the domestic revenue was INR 14,323 Mn which
100 grew by 3.6% YoY and export revenue was INR 6,435 Mn which declined by 5.5% YoY. The domestic revenue to
overall revenue has increased to 69.0% in 9MFY24 against 67.0% in 9MFY23 whereas exports to overall revenue
0 declined to 31.0% in 9MFY24 against 33.0% in 9MFY23. The decline was due to the Red Sea Crisis, where the transit
Mar-21

Mar-22
Jul-22

Mar-23
Jul-23
Sep-23
Nov-23
Jan-24
May-21
Jul-21
Sep-21
Nov-21
Jan-22
May-22
Sep-22
Nov-22
Jan-23
May-23

time via the Cape of Good Hope was delayed about four weeks to five weeks.

Profitability impacted due to an increase in RM costs and employee cost

Gross margin for the quarter contracted by 226 bps YoY but expanded by 147 bps QoQ to 30.7%. For 9MFY24 it
Laxmi Organics Sensex contracted by 269 bps YoY to 31.6%. EBITDA for Q3FY24 declined by 4.6% YoY but grew 34.2% YoY to INR 523 Mn.
This YoY decline was due to an increase in employee costs and an increase in raw material costs. The EBITDA margin
Listed on Mar-21 contracted by 84 bps YoY but expanded 156 bps QoQ to 7.5%. For 9MFY24, EBITDA declined by 8.3% YoY to INR
1,685 Mn and EBITDA margin contracted 79 bps YoY to 8.1%. Adj PAT for Q3FY24 declined 0.1% YoY but grew 153.8%
MARKET INFO
QoQ to INR 272 Mn. Adj PAT margin contracted 24 bps YoY but expanded 227 bps QoQ to 3.9%. For 9MFY24, Adj
PAT declined by 24.0% YoY to INR 762 Mn, with Adj PAT margin contracting 119 bps YoY to 3.7%. The Debt/Equity
SENSEX 71,139 stood at 0.1x for 9MFY24.

NIFTY 21,522

SHARE HOLDING PATTERN (%)

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

9.2% 16.5%
Promoters 69.8 72.4 72.4

FIIs 0.7 0.5 0.5

DIIs 3.5 1.6 1.6

Others 26.0 25.6 25.5 Revenue CAGR between FY23 Adj. PAT CAGR between FY23
Total 100 100 100 and FY26E and FY26E

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Unnati Jadhav, [email protected], +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 – Q3FY24 II 31st January 2024

Laxmi Organic Industries Ltd.

Key Concall Highlights:

• The chemical sector in CY23 was muted, the weaker demand continued in Q3FY24 at the global level.
• The big markets like China continued to be very weak, the capacities are running at a reduced rate. Some parts of Europe also continued to have weak demand
patterns.
• In the coating, adhesive, sealant and elastomer segment, the end customer segment such as foreign innovator companies were tapering down their inventories as
they were at the end of the financial year which led to slow pickup. But the demand is expected to pick up as the new year has started.
• In the packaging segment, specifically on the domestic side, results of FMCG companies post the festive season was dull, and rural consumption is on the weaker side.
This can impact the Q4FY24E performance.
• In the Pharma segment, customers in the export market continue to be weaker, but the domestic demand continues to be reasonably strong. In the agrochemical
space, the inventory in the pipeline is being reduced. The demand pick up is expected with more competition.
• The two key raw materials are acetic acid and ethanol. Acetic acid price was USD 600 per metric tonne in September 2023 which spiked up due to supply constraints.
As expected, the prices were moderated lower in Q3FY24 to USD 430 to USD 440. For Q4FY24E, the prices are expected to be in the same range.
• The ethanol price in Q2FY24 was USD 860, in Q3FY24 it moderated to USD 725. In Q4FY24, it is expected to be in the range of USD 770 to USD 740.
• Due to the Red Sea crisis, the transit time via the Cape of Good Hope was delayed by four weeks to five weeks. The price increase was in the range of 2x to 3x to
actual price.
• In certain of the export markets, Chinese competition is intense with aggressive pricing.
• The Dahej project execution is expected between 18 to 20 months for approximately INR 7,100 Mn investment. The asset turn is expected to be 2.5x times.

Valuation and view:

Laxmi Organic Industries revenue grew at a mid-single-digit with a lack of demand from end customer segments such as packaging where results of FMCG companies post
the festive season was dull, in the pharma segment export market continued to be weaker, in the agrochemical segment inventory was being reduced. The export sales
were impacted due to the Red Sea Crisis. We have introduced FY26E estimates and currently, the stock is trading at PE multiples of 6.4x/7.4x based on FY25E/FY26E EPS
estimates, respectively. We expect the revenue to grow at 9.2% CAGR over FY23-FY26E, and PAT to grow at 16.5% CAGR over FY23-FY26E. We arrive at a target price of
INR 272/share (implying a PE multiple of 36.50x to FY26E EPS of INR 7.44) and maintain a HOLD rating on the stock. We believe the Company could maintain volume
growth, but overall weak demand continues for the specialty chemical industry and uncertainty persists with the Red Sea crisis.

Q3FY24 Result Analysis

Particulars (INR Mn) Q3FY24 Q2FY24 Q3FY23 Q-o-Q Y-o-Y 9MFY24 9MFY23 Y-o-Y
Revenue from Operations 6,943 6,523 6,546 6.4% 6.1% 20,758 20,635 0.6%
Total Expenditure 6,420 6,133 5,999 4.7% 7.0% 19,073 18,796 1.5%
Cost of Raw Materials 4,934 4,295 4,135 14.9% 19.3% 13,708 12,089 13.4%
Purchase of Stock 70 31 342 128.2% -79.5% 273 1,560.0 -82.5%
Changes in Inventories -192 291 -88 -165.8% 118.0% 228 -79.7 -385.8%
Employee Cost 377 320 289 17.8% 30.4% 1,044 867.4 20.4%
Other Expenses 1,231 1,196 1,320 2.9% -6.7% 3,820 4,359.9 -12.4%
EBITDA 523 389 548 34.2% -4.6% 1,685 1,838 -8.3%
EBITDA Margin (%) 7.5% 6.0% 8.4% 156 bps -84 bps 8.1% 8.9% -79 bps
Depreciation 275 275 188 -0.1% 46.5% 760 493.7 54.0%
EBIT 247 114 360 117.3% -31.3% 925 1,345 -31.2%
Other Income 53 82 32 -34.9% 64.7% 175.0 82.2 113.0%
Interest Expense 5 21 57 -74.8% -90.9% 72 124.9 -42.5%
Share of Associates 0 0 0 NA NA 0.0 0.0 NA
PBT before Exceptional 296 175 335 68.6% -11.9% 1,028 1,302 -21.0%
Exceptional Items 0 0 0 NA NA 0.0 0.0 NA
PBT 296 175 335 68.6% -11.9% 1,028.1 1,302 -21.0%
Tax 24 68 63 -65.3% -62.3% 266 298 -10.9%
Minority interest 0 0 0 NA NA 0.0 0.9 NA
PAT 272 107 272 153.8% -0.1% 762 1,003 -24.0%
PAT Margin (%) 3.9% 1.6% 4.2% 227 bps -24 bps 3.7% 4.9% -119 bps
EPS 1.0 0.4 1.0 141.5% -3.4% 2.8 3.8 -24.8%
Adj. PAT 272 107 272 153.8% -0.1% 762 1,003 -24.0%
Adj. PAT Margin (%) 3.9% 1.6% 4.2% 227 bps -24 bps 3.7% 4.9% -119 bps
Adj. EPS 1.0 0.4 1.0 144.8% -3.8% 2.8 3.8 -25.0%

Segment Revenue

Essentials (Acetyl Intermediates) 4,948 4,696 3,604 5.4% 37.3% 14,146 14,148 0.0%

Specialty 1,876 1,826 3,025 2.7% -38.0% 5,208 5,963 14.5%

Source: Company, KRChoksey Research

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Unnati Jadhav, [email protected], +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 – Q3FY24 II 31st January 2024

Laxmi Organic Industries Ltd.

KEY FINANCIALS
Exhibit 1: Profit & Loss Statement

INR Millions FY22 FY23 FY24E FY25E FY26E

Revenues 30,843 27,966 28,310 31,424 36,452
COGS 21,256 18,552 18,800 19,989 22,964
Gross profit 9,587 9,414 9,510 11,435 13,487
Employee cost 1,244 1,159 1,459 1,697 1,968
Other expenses 4,666 5,810 5,406 6,033 6,926
EBITDA 3,676 2,445 2,644 3,705 4,593
Depreciation & amortization 481 724 1,006 1,220 1,506
EBIT 3,195 1,721 1,638 2,484 3,087
Interest expense 155 113 154 143 135
Other income 148 121 156 110 36
PBT 3,188 1,729 1,640 2,451 2,989
Tax 614 483 470 760 1,016
PAT 2,573 1,246 1,170 1,692 1,973
EPS (INR) 9.8 4.7 4.4 6.4 7.4
Source: Company, KRChoksey Research

Exhibit 2: Cash Flow Statement

INR Millions FY22 FY23 FY24E FY25E FY26E

Operating Cash Flow 650 1,991 1,965 2,499 2,617

Investing Cash Flow 546 (3,841) (373) (1,390) (1,464)

Financing Cash Flow (1,239) 2,325 934 (638) (541)

Net Inc/Dec in cash equivalents (43) 474 2,526 471 612
Opening Balance 166 336 810 3,337 3,807
Adjustments 213 0 0 0 0
Closing Balance Cash and Cash Eq. 336 810 3,337 3,807 4,420
Source: Company, KRChoksey Research

Exhibit 3: Key Ratio

Key Ratio FY22 FY23 FY24E FY25E FY26E

EBITDA Margin (%) 11.9% 8.7% 9.3% 11.8% 12.6%
Net Profit Margin (%) 8.3% 4.5% 4.1% 5.4% 5.4%
RoE (%) 22.1% 9.2% 8.0% 10.6% 11.1%
ROA (%) 12.6% 5.3% 4.6% 6.2% 6.7%
RoCE (%) 25.4% 11.6% 9.9% 13.0% 14.3%
Debt/Equity 0.10x 0.28x 0.34x 0.28x 0.24x

Source: Company, KRChoksey Research

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Unnati Jadhav, [email protected], +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 – Q3FY24 II 31st January 2024

Laxmi Organic Industries Ltd.

Exhibit 4: Balance Sheet
INR Millions FY22 FY23 FY24E FY25E FY26E
Property, plant and equipment 3,716 7,057 9,551 9,830 9,825
Right-of-use assets / CWIP / other intangibles 3,808 4,560 1,589 1,589 1,589
Other non current assets 228 310 314 349 405
Investments 13 28 28 28 28
Inventories 3,738 2,942 3,102 3,272 3,795

Trade receivables 6,684 5,702 5,772 6,407 7,433

Cash 336 810 3,337 3,807 4,420

Bank balance 1,486 498 498 498 498
Loans / other assets 1,735 1,501 1,537 1,704 1,962
Assets held for Sale 750 714 714 714 714
TOTAL ASSETS 22,495 24,122 26,442 28,198 30,667
Equity share capital 527 530 530 530 530
Other equity 12,371 13,587 14,676 16,249 18,083
Non-controlling interests 4 6 6 6 6
Total equity 12,902 14,124 15,212 16,785 18,620
Borrowings 1,333 3,970 5,140 4,764 4,495
Other non current liab 251 394 394 394 394
Trade payables 7,117 4,663 4,721 5,240 6,078
Other financial liabilities 643 489 489 490 491
Provisions and other current liabilities 249 482 487 526 589
TOTAL EQUITY AND LIABILITIES 22,495 24,122 26,442 28,198 30,667
Source: Company, KRChoksey Research

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Unnati Jadhav, [email protected], +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 – Q3FY24 II 31st January 2024

Laxmi Organic Industries Ltd.

Laxmi Organic Industries Ltd Rating Legend (Expected over a 12-month period)

CMP
Date TP (INR) Recommendation Our Rating Upside
(INR)
31-Jan-24 267 272 HOLD Buy More than 15%
31-Oct-23 256 258 HOLD
Accumulate 5% – 15%
01-Aug-23 270 302 ACCUMULATE
17-May-23 252 343 BUY Hold 0 – 5%

30-Jan-23 267 376 BUY

Reduce -5% – 0
29-Jul-22 311 380 BUY
09-May-22 387 530 BUY Sell Less than – 5%

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UNNATI SACHIN UNNATI SACHIN JADHAV
KRChoksey Shares and Securities Pvt. Ltd.
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JADHAV Date: 2024.01.31 14:30:17
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ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Unnati Jadhav, [email protected], +91-22-6696 5420 is also available on Bloomberg KRCS<GO>
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