Shares of AMI Organics surged more than 4% on Monday morning after JM Financial initiated a ‘Buy’ rating on the stock, forecasting a 20% upside. The brokerage firm set a target price of ₹1,965, expecting significant growth driven by new contract wins and a strong product pipeline. The stock, which closed at ₹1,629.60 on Friday, saw a strong response from investors, reflecting growing confidence in the company’s growth prospects.
Key Growth Drivers
JM Financial’s optimistic outlook for AMI Organics is based on the company’s expansion into new high-growth sectors and its ability to scale existing operations. The brokerage highlighted two key catalysts for growth:
- Nubeqa Intermediates Contract
AMI Organics is supplying five intermediates for the production of Nubeqa, a prostate cancer drug developed by Bayer and Fermion. The contract is expected to account for around 60% of AMI’s incremental revenue growth. The market size for Nubeqa intermediates could reach up to ₹12 billion by 2030, with AMI projected to capture 50-60% of the market, translating to ₹5-7 billion in revenue. This contract alone is poised to be a game changer for AMI’s revenue growth. - Electrolyte Additives for Li-ion Batteries
AMI Organics is also set to benefit from its venture into the production of electrolyte additives for lithium-ion batteries, such as Vinylene Carbonate (VC) and Fluorothylene Carbonate (FEC). These additives are crucial for battery efficiency and are in high demand. AMI is the first manufacturer of these additives outside China, giving it a competitive edge. The company has already signed long-term contracts for these products, with revenue expected to reach ₹400 million in FY25, ₹1 billion in FY26, and ₹1.5 billion by FY27. Additionally, AMI has signed an MoU with a global electrolyte manufacturer to further increase its presence in the battery industry by FY28.
Strong Advanced Intermediates Business
AMI Organics has built a solid foundation through its pharma intermediates business, which contributes significantly to its revenue. The company supplies intermediates for various APIs (Active Pharmaceutical Ingredients) used in fast-growing chronic therapies. With a market share of 50-90% in these intermediates, AMI continues to strengthen its position through 10+ years of patent protection for its key products.
The company also stands to benefit from recent legal wins for pharmaceutical giants like Teva and Sandoz, which will soon launch generic versions of drugs like Apixaban and Rivaroxaban. AMI’s intermediates are used in these drugs, and the expansion of generics markets will drive demand for the company’s products.
Expected Financial Performance
JM Financial expects AMI Organics to post impressive revenue and profit growth over the next few years. The brokerage forecasts a 31% revenue CAGR (Compound Annual Growth Rate) from FY24 to FY27, driven by new contracts, including Nubeqa intermediates and electrolyte additive sales. EBITDA is expected to grow at a 44% CAGR, while EPS could surge by 76% during the same period.
AMI’s gross margins are projected to improve as its Contract Development and Manufacturing Organization (CDMO) business grows, along with savings from its captive solar power generation project. EBITDA margins are expected to rise from 18% in FY24 to around 24% in FY27.
Strategic Moves and Future Outlook
In addition to its expanding presence in the pharma and battery segments, AMI Organics is entering the semiconductor chemical market through its acquisition of a controlling stake in Baba Fine Chemicals. This move allows AMI to tap into a high-entry-barrier industry and diversify its revenue streams further.
JM Financial’s positive assessment of AMI Organics highlights the company’s strong R&D capabilities, operational excellence, and strategic focus on high-growth sectors. The firm expects these factors to drive long-term growth and position AMI as a leader in the specialty chemicals industry.
Share Performance
As of 10:12 AM on Monday, shares of AMI Organics were trading 3.54% higher at ₹1,689.05 on the NSE, driven by JM Financial’s bullish outlook and increased investor interest
