Anand Rathi has given a ‘Buy’ rating to Rossari Biotech shares, setting a target price of ₹950, which suggests a 26% increase from Thursday’s closing price.
Rossari Biotech, a specialty chemicals manufacturer, is investing ₹180 crore in new projects expected to boost revenue by ₹700-900 crore once fully operational. This investment could increase current revenue by 40-50% in the coming years.
The company’s EBITDA margin, which had dropped to 12.4% after peaking at 17% in FY20 and FY21, rose to 13.6% in FY24. Anand Rathi expects margins to improve to 14.2% by FY26, thanks to cost efficiencies and better product mix.
Net profit is projected to grow by 24% annually over FY24-26, reaching ₹200 crore. This growth will be driven by strong revenue and improved margins. The firm’s return on equity (RoE) is expected to rise to 15.5% by FY26, up from 13.3% in FY24, and return on capital employed (RoCE) to 14.7%, up from 12.9%.
Rossari Biotech shares have traded at an average P/E of 45x over the last four years, and are currently at 32x FY24 earnings. Anand Rathi believes the stock is attractively valued at 19x FY26 EPS estimates, given the expected growth.
However, risks include delayed demand recovery, particularly in agrochemicals and textile chemicals, slower adoption of new products, delayed approvals, and margin pressures.
Rossari Biotech shares have gained over 10% in the past week but are down more than 4% year-to-date. At 1:00 pm, the shares were trading 1.08% higher at ₹764.25 on the BSE.
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