We initiated on Jubilant Ingrevia (Ingrevia) on March 18th, 2021 (note) at INR 240 per share, since then the stock is up >2.4x in less than 4 months! It still trades at ~11x FY23E EV/EBITDA, given the visibility on improving profile and robust pricing environment we believe there is room for further re-rating. Ingrevia came out with a robust set for Q4FY21 on the back of pricing in Acetic Anhydride and Ethyl Acetate (LS Chem EBITDA 19% vs 4% YoY). Demand side disruption in Acetyls is likely to continue over short term. On Spec Chem the growth was led by CDMO, Q3FY22 to see commercialisation of Diketene products a big trigger. We believe Ingrevias transition to Specialty remains underappreciated with >70% of EBITDA contribution from non-commoditised segments. We thus revise our Mar-22 target price from INR 420 in base case to INR 770 valuing at 15x EV/EBITDA, which implies 35% upside on the CMP. Our Bull / Bear case TP is at INR 1015 and INR 450 respectively....
We initiate coverage on Jubilant Ingrevia (Ingrevia) with a BUY rating on the stock. Ingrevia has demerged from Jubilant life Sciences limited , effective February 1st, 2021 and to be listed tomorrow (March 19th, 2021). We expect revenues to grow by double-digit in the near-term on the back of stabilization in pricing & demand for Acetic Anhydride, favourable price dynamics in Vitamin B3 and tailwinds in the Specialty segment. Over medium term, we expect new Capex initiatives (INR 950crs) towards key growth areas likely to drive overall business and margin profile. Further, Ingrevia is now less fragile to external shocks on account of de-risking initiatives and forward integrating into value added products. We thus value Ingrevia at 10x EV/EBITDA on FY23E, deriving a base case fair value of INR 420. Our Bull case & Bear case fair value stand at INR 660 and INR 200 respectively....
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