Multibagger Alert: This chemical intermediate manufacturer has given returns of 139% in the past year!

Going by management guidance estimates, the prospects of the company remain encouraging from FY22 onwards.

Chemical intermediates maker Hikal Limited has given investors stellar returns of 139.61% over the last year. The share price of the company stood at Rs 167.25 on January 21, 2021, and since then, it has more than doubled investor wealth.

Hikal engages in the manufacture of chemical intermediates, speciality chemicals, active pharma ingredients, and contract research activities. It operates through the Crop Protection and Pharmaceuticals segments. Pharma and crop protection form around 62% and 38% of operating revenues, respectively. The company is one of the largest suppliers of Gabapentin API (CNS) and in crop protection, one of the largest suppliers of Thiabendazole (TBZ).

In Q2FY22, Hikal posted revenue of Rs 463.96 crore with 26.64% YoY growth which was below estimates, impacted by the shutdown of the Mahad facility for 27 days in Q2FY22 due to heavy rains. The crop protection segment grew by 105% YoY, while the pharma segment saw revenue growth remaining flat on a YoY basis on account of slower offtake by customers this quarter, primarily due to several raw material shortages and global logistics issues. The company reported PBIDT (Ex OI) of Rs 90.90 crore, up 30.29% YoY, while the operating margins expanded to 19.38% in Q2FY22 from 18.76% in the year-ago period. During the quarter, the bottom line was up by 63.49% to Rs 44.06 crore.

Hikal has developed and commercialised a new Fungicide (CDMO) for a Japanese customer, the supply of the same is already started, and a significant scale-up is expected from H2FY22. Furthermore, it is planning to launch seven products (Four in Pharmaceutical and three in Crop protection) in FY22.

The management of the company has maintained revenue growth guidance of 15-20% over FY22-FY24 and expects EBITDA margin improvement of 50-100 bps per year on the back of several cost rationalisation and efficiency improvement measures. The Capex guidance for H2FY22 and FY23 stands at Rs 175 crore and Rs 300 crore respectively. Given management guidance estimates, the prospects of the company remain encouraging from FY22 onwards. However, global supply chain challenges coupled with a steep increase in input raw material prices will remain the key monitorable going forward.

At 1.15 pm on Monday, the stock of Hikal Limited was trading at Rs 379.45, down by 5.32% or Rs 21.30 per share on BSE. The 52-week high of the scrip is recorded at Rs 742 and the 52-week low at Rs 142.85 on the BSE.