Book partial profits in Ami Organics as it trades at 54% premium: Marwadi Shares

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Shares of speciality chemical manufacturer Ami Organics made a stellar market debut on Tuesday. The stock opened for trading at Rs 155.50 on the National Stock Exchange, compared to the issue price of Rs 910, marking a premium of 49.18%. On the BSE, Ami Organics opened at Rs 902, premium of Rs 292 or 47.87%.

At 11:45 am, the share was quoting at Rs 941 gaining 54.40% up by Rs 331.85 over its issue price of Rs 610. It made an intraday high of Rs 967.25 and a low of Rs 841.20, on the BSE.

Commenting on the robust listing Saurabh Joshi Research Analyst at Marwadi Shares and Finance recommends investors to book partial profits and hold the remaining for long term investment. “The company listed at Rs.910/- per share with a market cap of Rs 3,217 crore implying a valuation of 59.58 times P/E whereas its peers namely Aarti Industries and Hikal are trading at a P/E of 55.53 and 47.5 times. The company operates in the chemical manufacturing industry which has high entry barriers and strong growth potential. We believe the company’s strong and diversified product portfolio with extensive geographical presence and diversified customer base will result in delivering strong numbers going forward,” Joshi said.

Likewise, Ravi Singhal, Vice Chairman at GCL Securities advised shareholders to book 50 per cent profit above Rs 900 and hold the rest maintaining a trailing stop loss of Rs 811 apiece. “Ami Organics has a strong business outlook as it belongs to chemical space and it manufactures API, whose demand has almost doubled in the last one year. This demand is further expected to go northward and hence, Ami Organics is expected to get benefit of this rise in demand as there are limited suppliers of API.” Singhal said.

Whereas Santosh Meena, Head of Research at Swastika Investmart suggested investors stay put in Ami Organics on the back of strong fundamentals and a positive outlook for the sector.

Ami Organics is one of the leading research and development-driven manufacturers of specialty chemicals. The company manufactures different types of Advanced Pharmaceutical Intermediates and Active Pharmaceutical Ingredients (API) for New Chemical Entities, and materials for agrochemicals and fine chemicals. The company has three manufacturing facilities in Gujarat situated at Sachin, Ankleshwar & Jhagadia, with an aggregate installed capacity of 6,060 MTPA.

For the financial year ended March 31, 2021, the company reported total revenue of Rs 341.98 crore compared to Rs 238.89 crore in FY19. During the same period, the company profits more than double to Rs 54 crore in FY21 versus Rs 23.23 crore in FY19.

The Rs 569.64-crore initial public offer of the company garnered enthusiastic response from the investors between September 1 and 3 as it got subscribed 64.54 times. The public offering received bids of over 42.22 crore shares against the total issue size of over 65.42 lakh shares, according to the data available with the National Stock Exchange (NSE). Ami Organics shares allocated for the qualified institutional buyers (QIBs) was subscribed 86.64 times. The portion reserved for non-institutional investors was subscribed a whopping 154.81 times while that of retail individual investors (RIIs) was subscribed 13.36 times.

Specialty chemical manufacturer issue comprised of fresh issuance of equity shares of Rs 200 crore, and an offer for sale of up to 60,59,600 equity shares totalling to Rs 369.64 crore by promoters existing shareholders. The company will utilise net proceeds from the fresh issues towards repayment of certain debt, funding working capital requirements and general corporate purposes.