Laurus Lab (LAURUS) is a young, R&D led, Pharma Company, with strong expertise in Anti-retro viral (ARV) therapy. By leveraging its proven expertise in the realm of chemistry, it has become an integrated pharma player having strong presence across the value chain. The company’s major business segments are Formulations (38%), Synthesis (19%) and API business (41%) and Bio business (2%). In formulations business, the company has healthy pipeline of 30 ANDAs (Abbreviated New drug Approval) which will fuel the revenue growth going forward. In the Synthesis business, growth will be driven by optimum utilization of installed capacity, which will help to scale-up the business along with addition of new clients. Higher growth will also be aided by growth in API business, which is forward integrated to its formulations business. The major revenue of the API business is generated from ARV API followed by Onco API and Other API. Going forward, we believe that increasing demand of low cost drugs will lead to ramp up in exports in the US and emerging markets, which will aid higher growth in revenues. Strong business fundamentals such as diversified segments mix and strong product portfolio along with high return ratios, strong net cash position, and consistent payouts to shareholders make Laurus a compelling investment proposition. We expect the company to deliver Revenue/EBITDA /PAT CAGR of 26%/31%/32% during FY22-FY24E and hence, initiate coverage on Laurus Labs with a BUY and a target price of Rs 677. Foray in formulations business - a multi-year high growth opportunity: The Indian Pharmaceutical market is growing at a steady pace and presents USD 42bn opportunity. The increasing demand of low cost drugs will lead to ramp up in exports in the US and EU markets. We believe that the company is all set to increase its revenue base on the back of higher revenue from US and EU market where it has pipeline of 31 ANDAs and 15 PARA IV opportunities. Apart from this, the LMIC (Low and middle-income countries) tender market is also a major contributor (75%) to the formulations revenue, which make Laurus poised for growth. Synthesis business to take charge of growth going forward: In order to diversify its business Laurus plans to increase its capacity in synthesis business and revenue contribution from the synthesis business to hit 25% by FY25 from 19% in FY21. Addition of new clients and geographies will increase the reach and visibility of the company. Currently the company has collaborated with Aspen group entity to manufacture and supply certain hormonal intermediates. Aspen funded the investment of about EUR26m. Another partner is C2 Pharma where company manufactures Digoxin. It has built a dedicated block for this task. Due to higher demand in CDMO business, the company has planned to expand its capacity to 550Kl by FY25 from 287KL in FY22, which will be a dedicated capacity for synthesis business. API business will be driven by volume growth: The key molecules that Laurus sells in this segment are Efavirenz, Tenofovir, Disoproxil, Fumarate, and Emitracitabine. Apart from ARV, the company also sells Onco and Other API. 40% of the ARV business of Laurus is exports. The company has consistently expanded its capacities in API segment from 220KL in FY16 to 5,600 KL in FY22.The API capacities are currently running at optimum utilization, new capacity will lead to higher volume growth going forward. Valuation: A high growth company with strong client relationship in a business with strong entry barriers and superior EBITDA margins as compared to peers deserves valuation re-rating. We expect Laurus Labs to report a CAGR of 26%/31%/32% at Revenue/EBITDA/PAT level over FY22-24E. The stock is trading at P/E of 19.4x on FY24 EPS and EV/EBITDA of 12.5x on FY24 EBITDA. We assign 25x as target multiple and arrive at target price of INR 677 per share, which offers 29% upside from current valuations.

Dixon reported a healthy revenue growth of ~40% YoY in Q4FY22, mainly driven by an over three-fold jump in the Mobile & EMS revenues. Q4FY22 EBITDA margins improved ~22bps YoY & ~65bps QoQ at ~4%, on account of operating leverage, improvement in the cost structure in all the segments and continued implementation of strategic price increases in the ODM business of Lighting and Washing machine. The margins are expected to improve further as more price hikes are underway. It has 5 PLIs under its umbrella now and doing significant investments over the same. The businesses for key segments like Mobile, Home Appliances are ramping up and expected to gather pace over FY23-24e. Over next 2-3 years, the normalized level of margins seen in the range of ~4-4.2%. The ROCE and ROE are expected to go back to normal level in next 9-15 months. We remain positive on the company’s mid-to-long term potential and recommend the stock with “Buy” rating. Q4FY22 earnings key highlights Dixon’s Q4FY22 net revenues grew ~40.0% YoY at Rs 29,528 mn, led by Mobile & EMS segment (+346.4% YoY) and Home Appliances (+59.8% YoY) and. Mobile & EMS has became the largest segment with revenue contribution of ~43.8%, surpassing Consumer Electronics at ~34.2%. EBITDA Margins improved ~22bps YoY and ~65bps QoQ at ~4.0%, as key segments like Mobile & EMS, Home Application and Consumer Electronics business saw improvement in margins. Q4FY22 Net Profit stood up by ~42.6% YoY at Rs 631 mn; PAT margins remained flat YoY at ~2.1%. Segment performance LED TV: Revenue declined ~14.6% YoY at Rs 10,104 mn on decline in volume and realizations. Revenue share declined to ~34% (~56% YoY), ODM mix decreased to ~5% (~6% YoY). Margins improved ~43bps YoY at ~2.8%. Received a huge LED TV order in the ODM segment from a large global brand; commercial production already started. Expect significant volume from the brand in current FY23. LED TV’s FY23 volume seen up ~40% YoY at ~4.2 mn units. Lighting Products: Revenues fell ~20.2% YoY at 3,046 million; Margins down ~93bps YoY at ~7.1%. ODM revenue share flat at ~90%. In final stage of technical approval from a large global brand; exports are expected to commence from FY23. Already a beneficiary of PLI scheme in LED lights. Mobile & EMS: Revenues jumped ~346.4% YoY at Rs 12,941 million. Margins improved ~57bps YoY at ~3.4%. Revenue share increased to ~43.8% (~13.7% YoY). Motorola business ramped up; order book of ~1.5 mn units for Q2FY23. Segment revenue seen at Rs 70k-75k mn in FY23. Home Appliances: Revenue increased ~59.8% YoY at Rs 2,341 mn. Margins up by ~92bps YoY at ~7.9%. Delivery of FATL WM has started for Bosch. Has tied up with additional customers; delivery to start from Feb-22. FY23 volume seen up by ~30% YoY at ~1.6 mn units. Update on new product offerings LED monitor production started from Apr-22; expect a volume of ~0.5 mn units in the 1st year. To incur a capex of Rs 200 mn in FY23 in LED lighting PLI scheme; Rs 1,000 mn over 5 years. Setting up ~2 lac sq ft mobile factory in Noida to cater Nokia, i-tel; production to start from Q1FY23. Laptop production started for Acer in one month; also to start manufacturing tablets. Setting up 1.2 mn annual capacity for Refrigerator; set a mass production target by Q2FY24. Outlook remains positive We believe that Dixon’s strong performance to continue over FY22-FY24E on the back of robust order pipeline, new client additions, new product launches, capacity expansion and substantial increase in mobile revenue. Post Q4FY22earnings, we have revised our price target at Rs 4,483, valuing the stock at 50x FY24e EPS. We have a “Buy” rating on the stock.

Lux Industries Ltd. (LUX), reported sales for Q4FY22 declined by ~1.5% YoY to Rs 5869 mn. Sales volumes in Q4FY22 was impacted due to continous increase in product prices as company took regular price increases in order to pass on increased raw material prices. For FY22 company reported sales of Rs 22959 mn up by ~17.6% YoY. Volumes for FY22 declined by ~1% YoY and rest of the growth was on account of price increase and improved product mix. Company witnessed healthy traction for its men’s premium brand “ONN” (contributed ~5% of sales in FY22) with sales of ~Rs 1200 mn up ~52% YoY & womens brand “Lyra” (contributed ~13% of sales in FY22) with sales of ~Rs 3020 mn up ~34% YoY (backed by a volume growth of ~22% YoY). Management highlighted that it will be focussing on profitable growth and would not like to dilute the margins to drive sales growth. On its profitable growth trajectory, we are positive on Lux’s long-term growth prospects for its strong brand equity, new product launch plans and long-standing operations in the innerwear industry. We have valued the stock at 15xFY24e EPS to arrive at a target price of Rs 2126 and thus have a ‘Accumulate’ rating on the stock. Key Earnings Highlights In Q4FY22, the company reported a ~1.5% YoY decline in sales to Rs 5,869 mn. Volumes declined due to continuous increase in product prices. Consumers usually take some time to adjust with increased product prices. Gross margin for Q4FY22 declined by 100 bps YoY to 36.1% on increase in raw material prices. Gross margins for FY22 increased by ~298 bps YoY at 37.4% on account of prices increases taken by the company and a better product mix. Q4FY22 EBITDA declined by 13.5% YoY to 1,070 mn. EBITDA margin for Q4FY22 declined by 253 bps YoY to 18.2%, mainly on account of decline in gross margins and increase in advertisement expenditure. PAT for Q4FY22 declined by ~19.4% YoY to Rs 731 mn. PAT for FY22 increased by ~25.5% YoY to Rs 3,381 mn mainly led by a better gross margin. Outlook and Valuation: We believe, company is well-poised for growth on the back of increasing share of premium products, growing retail & online presence & new product launches. During Q4FY22, company launed its lingerie product range under the brand “Lyra” which should help in transitioning “Lyra” from a single product category (mostly legging) to a multi-product, multi-category women’s wardrobe brand. At the current price the stock is trading at 14.2x FY24e EPS. We have valued the stock at 15xFY24e EPS of Rs 141.7, to arrive at a target price of Rs 2126, which provides an upside of ~6% based on the current market price.

Results were below estimates mainly due to muted revenues from India business and lower revenues from the emerging markets. The company reported lower gross margin due to increased prices of raw material and higher employee costs. Improvement in revenue of US business and speciality portfolio was the highlight of the quarter. There are short-term headwinds of pricing pressure in raw material costs and forex fluctuations, which will lead to muted EBTIDA margins going ahead. The company guided that revenue growth of 8%-9% is sustainable. In FY23 the SUN plans to invest in R&D of Phase III trials of Ilumya and other speciality drugs. In US, Sun is diversifying into specialty products like Ilumya, Levulan, BromSite, Cequa, Xelpros, Odomzo, Yonsa, Winlevi, etc which will help to aid the revenue growth. Company’s 4QFY22 US sales dipped 2% QoQ to US$389 mn due to seasonality. Global specialty sales increased 30%+ YoY and 1% QoQ in 4QFY22 to US$185 mn. With stabilization in specialty spends the company will benefit from operating leverage. We recommend Accumulate rating on the stock of the company with a target price of Rs 1,016 per share, 26x FY24E EPS. Speciality portfolio to drive the growth The product mix will change going forward, driven by higher contribution from the specialty and strong India business. Ilumya – The branded drug of the company used for autoimmune disorder recorded robust growth of 81% YoY registering sales of USD 315 Mn in the US. The company launched 11 new products in the India market and it holds 8.3% market share in the India business The company has rich pipeline of 93 ANDAs awaiting USFDA approval (out of which are 28 tentative approvals). Additionally, the portfolio of the company also includes 54 approved NDAs while 13 NDAs await US FDA approval. Valuation: The speciality segment of the company looks attractive due to robust pipeline and ramp up in branded drugs prescriptions. The India business continues to grow at high double digit with increased market share. The company plans to ramp up in chronic and branded portfolio. We assign 26x PE multiple to FY24E earnings and arrive at a target price Rs 1,016, offering 18% upside from current levels. Buy.

Subdued auto production due to chip related issues and rising RM costs recently hit Mayur’s performance. Mayur’s Q4FY22 standalone sales was down ~22% YoY, led by a decline in volumes. PAT witnessed a steeper decline, ~50% with a subdued margin of 15.7%. Higher RM costs, unfavourable product mix and lower scale of operation hit margin. However, we maintain BUY rating on Mayur Uniquoters with a TP of Rs 559, as the company is getting traction in higher margin business clients and PU business started making small contributions. Mayur is set to get good amount of new businesses from Mercedes and VW India with improvement on chip shortage front. They have also got approval from BMW and business should start in FY23. PU business is set to get a fillip with recent ADD imposition. With volume recovery in footwear, ramp up of PU plant and businesses from new clients such as VW, Mercedes, BMW; we expect a much stronger performance from FY23 onwards. A subdued performance in challenging environment Mayur Uniquoters’ standalone revenue came in at Rs 1,469mn, a de-growth of ~22% YoY (down ~13% QoQ), slightly lower than our estimates. YoY de-growth was totally led by lower volume as the company witnessed a subdued demand environment in both footwear and auto businesses. On yearly basis, the company has posted a good 26% growth, led by realization growth. Margin was subdued EBITDA stood at Rs 231mn, with a margin of 15.7% compared to 19.1% in Q3FY22 and 28.9% in Q4FY21. Margin profile remained under pressure as higher RM costs continue to hurt. In addition, product mix was not favourable during the quarter. On the consolidated level in FY22, the company has posted sales of Rs 6,565mn, 28% YoY growth and PAT of Rs 944mn, 5% YoY growth. Several new opportunities to fuel the momentum The PU plant has made a low contribution in FY22 as due to pandemic issues, everything got delayed. Mayur is set to grow this business as clients would look to have alternate options for China. ADD on PU leather has brightened the prospects. The company continue to focus on high margin businesses and new client additions in high margin business will be continued in the future. Start of BMW business and ramp up of Mercedes business will further boost margins going forward. Valuation and risk The management has guided for 15%-20% volume growth in FY23. Maintaining its track record of rewarding shareholders, Mayur has recently bought back shares through a tender offer of 1.4% of equity share capital (6.25 lakh shares) at the price of Rs.650. The company has plans to add capacity in PU business as they start getting more traction. Also, they are focusing on backward integration. Also, they have incorporated a new subsidiary to create a brand name and hit the retail business which can be very lucrative in the long run. With PU plant ramp up, commencement of Mercedes business, BMW business in future and VW India business getting traction, we estimate strong earnings growth in FY23e & FY24e. Considering good return ratios and consistent handsome payouts to shareholders, we value Mayur at 20x its FY24e earnings to arrive at a TP of Rs 559 apiece and recommend BUY.

HCGEL continued to register the highest ever quarterly revenues and EBITDA in Q4FY22 with some regions delivering very high double digit/ triple digit revenue growth on a YoY basis. The new centres continued their scale-up trajectory with strong revenue growth of 54.3% YoY while existing HCG centres registered a growth of 15.6% YoY. New centres registered an operating EBITDA of Rs 21 Mn against a loss of Rs (47) Mn in Q4FY21. ARPOBs have been steadily increasing because of higher share of high-end surgeries, which is a sustainable trend. The Centre of Excellence (CoE) generated an ARPOB of Rs 56,800 compared to Rs 48,800 in FY22. International revenues would further boost the ARPOB of CoE going forward. With respect to the existing oncology centres, HCGEL expects a revenue growth of high teens. There is a scope for EBITDA margin improvement of the existing centres from the current level of 20-21% to 23-24% over the medium to long term, according to the Management. The improved EBITDA margins will be driven by 3-% price hike, volume increase, Payor and mortality mix. OPD/IPD inflow is likely to improve operational leverage, going forward. HCG is well poised to capture the growing potential with focus on cancer therapy. On an overall basis, we are positive about the prospects of HCGEL and we recommend a “Buy" rating on the stock. Decent performance delivered HCGEL reported good set of numbers for Q4FY22. While on a YoY basis there was huge growth of 22.3% due to improvement in ARPOB (11.8% YoY) and occupancy rate, on a sequential basis the growth was 1.9%. Aggregate ARPOB was Rs 39725 for Q4FY22 compared to Rs 35545 for Q4FY21. Occupancy for Q4FY22 was 59.9% compared to 54.1% in Q4FY21. ALOS for FY22 was 2.28 days. EBITDA increased by 2.2% QoQ whereas EBITDA Margin improved by 6 bps QoQ and 410 bps YoY from 13.2% in Q4FY21 to 17.3% in Q4FY22. The number of IVF cycles for Milann in Q4FY22 was 497 compared to 473 in Q4FY21. Milann recorded revenues of Rs 157 Mn in Q4FY22 compared to Rs 141 Mn in Q4FY21. New registrations were 4633 in FY22 compared to 3578 in FY21. Outlook and Valuation: We are positive about the prospects connected with HCGEL. Both the existing and new centres should perform robustly in the future. Further, HCGEL’s focus on consolidation of existing operations would ensure the strength of the balance sheet. We value the stock at 16x EV/EBITDA with respect to FY24e EBITDA to arrive at a Target Price of Rs 352 and recommend a “Buy” rating on the stock.

Q4FY22 revenue of Aarti Industries grew by 45.2% YoY & declined by mere 0.6% QoQ to Rs17.55bn. Robust revenue momentum was supported by better realisations owing to company’s ability to pass on raw material costs. Also, healthy volume gains led by continued strong demand trajectory for products in the key end-user industries. Revenue growth could have been higher, but supply shortage of key raw material viz. Nitric Acid impacted production of various products under the speciality chemicals segment. Gross margin contracted by 631bps YoY & expanded by 74bps QoQ to 47.5% in Q4FY22. Moderation of margins on YoY basis is due to time lag in cost pass through. EBITDA grew by 30.3% YoY & declined by 4.6% QoQ to Rs3.39bn in Q4FY22. EBITDA margins contracted by 221bps YoY & 83bps QoQ to 19.3% in Q4FY22. PAT grew by 42.3% YoY & de-grew by 5.6% QoQ to Rs19.4bn in Q4FY22. The stock has recently corrected by 27% and considering the strong growth outlook & reasonable valuation provides comfort for investors to ride on the growth story, therefore, we assign BUY rating on the stock. Pharma margins almost flattish sequentially, revenue to witness 15-25% growth in next 2-3 years EBIT margins in pharma segment stood at 17.2% in Q4FY22 vs 17.3% in Q3FY22 vs 14.7% in Q2FY22. The company has been able to pass on the cost inflation to its ends user industries, which led to flattish margins during the quarter. The company is increasing its capacities in API’s & intermediates and is expected to commercialize by Q1FY23 and improving product mix towards higher value-added segments will increase its presence in key regulated markets and improve the growth trajectory going ahead. The off-patented approach is paying off well to drive growth. The new API capacity commercialization in next quarter might lead to increase in fixed cost, which will be absorbed once capacity ramps up faster. Management seems confident of regaining its 20%+ margins over the coming quarters. Management guidance of 15-25% growth for the next 2-3 years is on track on the back of stronger volumes from API & intermediates segment. De-bottlenecking in caffeine business will increase its presence further into key markets. Operating margins reported higher than estimates, Cost pass through visible in numbers The company reported EBITDA margin of 19.3% in Q4FY22 vs our estimate of 16.9%. This was despite shortage in one of key raw materials Nitric acid. We feel that Aarti has been successfully able to pass on its raw material cost and has proven its mettle in an environment wherein other players are struggling. We feel confident of maintaining gross margins from hereon & even improve to around 50% in the coming year’s on the back of increased focus on high margin segments & better product mix. Valuation Currently, the stock is trading at FY24 P/E of 24x. We value the stock on forward P/E multiple of 30x and, thereby, arrive at target price of Rs 1024 per share which offers upside of 26% from current valuations. Therefore, we assign BUY rating on the stock.

Posted 2nd consecutive quarter of outperformance, margins surpassed all estimates driven majorly by good management of RMC, better product mix (higher sales of refreshed products), price increases, higher export contribution to 14% in Q4FY22 from ~7% in Q4FY21 & lower A&P spends. Management confirmed FY23 is the year of big bang launches & the team is very enthusiastic to get back its lost glory. 1) 1.5+ months of order book in hand, 2) expectation of gradual resolution of supply challenges, 3) driving CNG in the fast lane and 4) new launches to drive growth & margin improvement ahead. It is getting back its mojo back, strongly recommend BUY for a Target of 9,248. Vehicle laddering, CNG and promising new launches in FY23/24 to improve market share ü On ground demand momentum is healthy, driven by CNG model. Maruti is an undisputed leader with 85% share in CNG with multiple products offering is working really well. ü FY23 will be a year of big bang launches, which will plug the gaps to recover its lost market share and will be the answer to the competition. Industry outlook is also promising for 34-35 lakh units. ü Vehicle laddering strategy (placing products at every price point) worked well in hatchback segment, and our interaction with dealers indicates similar action will be fruitful in SUVs. International market is icing on the cake, reported triple digit growth in FY22 ü Reported highest ever exports of ~238K units, a growth of 148% in FY22 driven by usage of Toyota’s international network, introduction of more products, expanding reach & implementing innovative selling practices. The opportunity is good & renewed efforts are working very well. Margin improvement trajectory continued for a 3rd consecutive quarter, near term hiccups likely ü EBITDA Margin moved up from 4.2% in Q2FY22 to 6.7% in Q3FY22 & touched 9.1% in Q4FY22. ü We believe with 1) operating leverage, 2) better product mix (higher sales of refreshed products & high margin upcoming SUVs), 3) geographic mix (higher exports), 4) lower discounts/royalty, 5) price increase & cost initiatives to lift margins back to double-digit. ü Q1FY23 margins will be lower QoQ due to rise in steel, aluminium & copper prices. Negotiation is ongoing, and with higher production & price increase, Maruti can negate most of this impact. Other key highlights ü 1) FY23e capex of Rs 50bn announced majorly on new model launches, 2) Average discounts fall further to Rs 11,130 in Q4FY22 from Rs 15,200 in Q3FY22, 3) Inventory lowest at just 40K units. Valuations & recommendation ü We continue to remain positive on Maruti Suzuki on account of upcoming product launches and possible market share gains. Exports/CNG doing phenomenal, improvement in chip supplies is real. Expect an all-around improvement & a few ‘Swift’ kind of epic SUV launches can turn the tables completely. Recommend BUY, valuing at 27x to arrive at a target price of Rs 9,248 apiece.

Apollo Hospitals Enterprise Ltd | Q4FY22 Result Update | Poised for higher growth trajectory CMP: Rs 3,861 | Target Price: Rs 4,636 | Upside: 20.0% | Rating: Buy Q4FY22 saw a recovery in terms of patient counts, ARPOBs and occupancy for the mature and new hospitals of Apollo. The proportion of local patients being treated in Apollo Hospitals continued to improve. There has been an improvement in EBITDA margins of new and existing hospitals both on a YoY and QoQ basis. EBITDA margin of 23% on a blended basis for the hospitals is sustainable. The management is guiding for robust mid-teens growth and ~20% yoy growth in hospitals and pharmacies, respectively in FY2023. For hospitals, APHS is also guiding for margin expansion of 150-200 bps yoy in FY2023, led by improved mix and cost optimization. The combined pharmacy division including the back-end and front end posted a revenue growth of 23% YoY during the quarter. Diagnostics and Primary care are being ramped up in AHLL (Apollo Health and Lifestyle Limited). The Diagnostics sub segment registered a growth of 47%YoY during the quarter. Gross margins at a consolidated level have improved because of less Covid contribution and is on the path to reach the levels achieved in pre-Covid years of FY18 and FY19. The healthcare vertical is poised to deliver superior growth in the next 1-2 years through better asset utilisation and increase in ARPOBs. International revenues should also pick up in the next 1-2 years. Besides, there would be a focus on centres of excellence as well as on higher realisation procedures within the oncology, cardiac, neurology and orthopaedics vertical. There would also be some cost rationalisation measures. The backend pharmacy division along with 24x7 is also poised for superior growth in the near future. AHLL should also continue with its superior growth trajectory, particularly in the diagnostics business, which should achieve a revenue of Rs 500 crore in FY23 and Rs 1000 cr in the next 3-4 years’. On an overall basis, we are positive about the prospects of Apollo and we maintain a “Buy" rating on the stock. Decent performance on a YoY basis Apollo reported decent set of numbers for Q4FY22. While on a YoY basis there was a 23.7% increase in revenue, on a QoQ basis there was a degrowth of 2.5%. EBITDA margin for Q4FY22 decreased by 130 bps YoY respectively. EBITDA margin stood at 13.1%. Occupancy across the group was 58% in Q4FY22. ARPOB (excluding vaccination) was Rs 48,510 in Q4FY22. ALOS for FY22 was 3.96 days. During the quarter, Healthcare services posted an EBITDA margin of 24.3%, Pharmacy—1.4% (after adjusting for 24x7 operating costs) and AHLL—12%. There has been a 42% yoy volume growth in surgeries in FY2022. Outlook and Valuation: We are positive about the prospects connected with Apollo. Both the healthcare services and pharmacy including 24x7 should perform robustly in the future. AHLL should also report superior performance. We value the stock at 21x FY24e EBITDA to arrive at a Target Price of Rs 4,636. BUY.

Bodal Chemicals Ltd | Q4FY22 Result Update | Strong visibility of growth going ahead CMP: Rs 94 | Target Price: Rs 152 | Upside: 62% | Rating: BUY Q4FY22 revenue grew by 38% YoY & 6.3% QoQ to Rs5.97bn majorly led by increasing utilization & better realization of DI & Dyestuff business. Gross margin expanded by 355bps YoY but contracted by 370bps QoQ to 41.3% in Q4FY22. Sequential contraction of margins is due to increase in raw material cost during the quarter. EBITDA grew by 16.5% YoY & declined by 21.3% QoQ to Rs538mn in Q4FY22. EBITDA margins contracted by 166bps YoY & 316bps QoQ to 9% in Q4FY22. Despite improvement on YoY basis in gross margins, EBITDA margins contracted led by higher employee and other expenses. Consolidated PAT grew by 31% YoY & 27% QoQ to Rs309mn in Q4FY22. Considering, the growth visibility in sight backed by strong growth in core product portfolio, inorganic acquisition & greenfield expansion, we assign BUY rating on the stock. Greenfield expansion and inorganic acquisitions to drive growth going ahead The company is undergoing a greenfield expansion into benzene downstream products having capacity of 78,960 TPA and expansion of sulphuric acid & derivatives having capacity of 3,40,000 TPA at Saykha GIDC, Bharuch, Gujarat. Total cost of the project will be around Rs4bn with revenue potential of Rs5.5bn alongwith EBITDA margins of 15-18%. Also, the company acquired SCC chlor alkali complex, which is a unit of Mawana Sugars Ltd, located at Rajpura, Punjab in March 2021. The complex has a capacity of 82,500 TPA alongwith manufacturing of auxillaries like stable bleaching powder, chlorine etc. The company would further upgrade the plant replacing old electrolysers and increase chlor alkali complex capacity by another 16,500 TPA which would be completed by Q3FY23. This would cost the company Rs1-1.2bn. Visibility in operations of major subsidiaries will help sustain the revenue growth going ahead SPS Processors reported revenues of Rs565mn & loss of Rs63.3mn in Q4FY22. On SPS Processors, the company VS production is ramping up. The expected revenue at peak utilization would be Rs1.2-1.4bn. As the business ramps up, we expect the company to report profits. Trion Chemicals reported revenues of Rs104mn in Q4FY22 and Rs346mn for FY22 which is ~209% growth on YoY basis. The major issues regarding hazardous application of TCCA in US market has been resolved and company is expecting ramp up much faster in the coming quarters. Valuation The company’s major end users are textiles, leather, plastics & pigments wherein demand has witnessed robust pickup and with expansion into newer businesses like benzene derivatives & TCCA pick up we feel the sales growth would sustain going forward. We value the stock on PE multiple of 8.5x FY24 projections and arrive at a target price of Rs 152 per share with an upside of 62% from current levels. Therefore, we maintain BUY rating on the stock.