Thread by @AnishA_Moonka

Ami Organics IPO notes ⚗️

Supplies Raw materials (Intermediates) to API players (7% of revenues from Laurus Labs for example)

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A Thread 🧵👇

1/ Basics about the IPO.

Raising 200crs of Fresh Issue (& OFS of 370crs): will be used for repayment of debt & WC

MCap at 2200crs: EV/S of 6 & EV/EBITDA of 26 (stretched for an unknown company)

Promoters only hold 41% after the IPO

2/ An Pharma intermediates player that sells to API players focusing on high-growth therapeutics.

Caters to 150 customers (incl. Laurus, Cadila & MNC players, etc) | 50% exports

3/ R&D Expertise: Market leader across many intermediates | 66 R&D Personnel | 8 Process Patents | 1-2% of rev

High Entry Barriers due to the complex chemistries

The capacity of 6060 MTPA (3600MTPA recently through inorganic): old plant of 2460 MTPA at 60% utilisation

4/ Breakup of the rev 👇

Could be helpful in tracking how the offtake of other companies are; for ex: they supply intermediates of Dolutegravir to Laurus Labs.

5/ 5 customers account for 44% of the rev: Concentration risk; any change in end product offtake will have reverberations into their P&L.

GMs have increased from 33% to 45% in 3yrs: Might not be sustainable

6/ Acquired the incremental 3600 MTPA capacity for just 93crs; ability to scale up with higher value products is a key trackable.

7/ Financials:

High Working capital requirements: weak cash flow conversion | High Asset Turnover ensures a good return on capital

Revenue growth might sustain as the new plants ramp up, although margins look to be on the higher side (Gross margins look subnormal)

8/ Risks:

- Unlisted group company into APIs which wasn't mentioned in the IPO prospectus; check out the tweets below by @arpit971 & @tusharbohra
- Any adverse USFDA reaction
- Not clear if they can pass on the RM price increases

9/

- Operations are dependent on the ability to collaborate & innovate; a key trackable
- Newly acquired plants (60% of total capacity) from Gujarat Organics might not yield effective results.
- Product concentration risks: 40-45% of rev from 2 products 👇

10/

Outlook:

Better be cautious rather than aggressive in betting on a new company (not to forget, in a sector which is currently valued as if nothing can go wrong) with so many unknowns; even the valuations are not in our favour.

Comparison with the peers 👇

End of Thread.

Edit: They have mentioned their group company "Ami Lifesciences" which is into APIs in their RHP.