Buy Camlin Fine Sciences; target of Rs 140: Emkay Global Financial

Emkay Global Financial's report on Camlin Fine Sciences

CFIN's consolidated Q2 sales were largely in line our estimates (up 15.5% yoy). Growth was mainly led by notable revenue performance at the subsidiary level (up 40% yoy), while the standalone business reported a marginal yoy growth of ~2%. Consolidated EBITDA was up 12% yoy, led by better margins at the subsidiary level (~900bps yoy). Standalone margins fell ~800bps, led by forex losses to the tune of ~Rs73mn. Mexico, Brazil and China subsidiaries reported the best margins till date. CFIN's plan to acquire China subsidiary's stake (49%) has been put on hold due to political uncertainties. These funds would be instead diverted to setting up a plant for Vanillin and its allied products at Dahej at a cost of Rs1.35bn, expected by the end of FY22.

Outlook

We remain constructive on the overall trajectory of the business, led by incremental plans at the Dahej facility and strong operational performance at the subsidiary level. We raise TP to Rs 140 from Rs115, rolling forward to FY23E (15x); maintain Buy with OW in EAP.

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