Results Review for Aether Industries, Computer Age Management Services, Greenpanel

Aether Industries (NS:AETH): We retain our BUY rating on Aether Industries, with a target price of INR 1,180, on the back of (1) capacity expansion-led growth, (2) advanced R&D capabilities, (3) technocratic management, (4) market-leading position in most of its products, (5) strong product pipeline, and (6) marquee customer base. EBITDA/APAT was 24/33% below our estimates, mainly owing to a 23% fall in revenue and higher-than-expected tax outgo.

Computer Age Management Services: Computer Age Management Services Lt (BO:COMU) clocked in-line core revenues at INR2.5bn (+2.4% QoQ) however, the disappointment stemmed from a sharp rise in other opex (+16% QoQ) due to higher marketing spends and regulatory audits, driving sequentially flat core income/PAT to INR0.91bn/0.74bn. Continued market leadership in the duopoly RTA market, sizeable entry barriers, and high switching costs position CAMS favorably however, we are wary of SEBI's ongoing discussion on further TER cuts that could potentially derail RTAs’ medium-term earnings. We trim our FY24E/25E estimates by 3.2/3.4% to factor in higher opex and delayed accruals in non-MF business. Given the sustained pricing pressure and a modest 9.7/16.3% revenue/OP CAGRs over FY23-25E, we maintain REDUCE with a lower TP of INR2,000 (25.5x Mar-25E EV/NOPLAT + Mar-24E cash and investments roll-forward multiple adjustments from Sep-24E to Mar-25E).

Green panel Industries Ltd (NS:GREP): We maintain our BUY rating with an unchanged target price of INR 430/share (12/20x its Mar’25E consolidated EBITDA/APAT). We like Greenpanel for its leadership positioning in the MDF segment, its large retail presence (85% in FY23), superior margin, and working capital profile. The surge in low-realization MDF export volume (+89% YoY) drove up the total volume by 10% YoY. Higher exports, rising timber prices, and increased brand spending pulled down the MDF EBITDA margin by ~400/1300bps QoQ/YoY to 22%.

Aether Industries

Margins on the rise

We retain our BUY rating on Aether Industries, with a target price of INR 1,180, on the back of (1) capacity expansion-led growth, (2) advanced R&D capabilities, (3) technocratic management, (4) market leading position in most of its products, (5) strong product pipeline, and (6) marquee customer base. EBITDA/APAT was 24/33% below our estimates, mainly owing to a 23% fall in revenue and higher-than-expected tax outgo.

Financial performance: Revenue grew 10/25% QoQ/YoY to INR 1,838mn, led by growth in all three business models. EBITDA grew 26/42% QoQ/YoY to INR 596mn in Q4, with EBITDA margin increasing by 414/390bps QoQ/YoY to ~32%, owing to reduced operating expenses and increased CRAMS revenue, which is a higher-margin business. APAT came in at INR 376mn (+7/+44% QoQ/YoY).

Key con call takeaways: (1) Segmental revenue break-up for FY23 was: 52% large-scale manufacturing (LSM), 13% CRAMS, and 34% contract manufacturing. (2) The end-user industry mix of Aether for FY23 was: pharmaceutical-42%, agrochemical-35%, high performance photography-6%, material sciences-5%, coatings-3% and others-9%. (3) Exports formed 69% of the total revenue, which include export to SEZ and EOU units in India. (4) Business with thirteen new customers commenced during Q4FY23 across all business models. (5) Commercial production began in Jan’23 at the company's manufacturing site-3, where three of the five proposed products have been launched successfully. The other two products were launched in May’23.

Change in estimates: We cut our FY24/25 EPS estimates by 9.3/6.4% to INR 17.1/24.6, to factor in the weak performance in FY23, the slower-than-expected ramp-up of manufacturing site-3, and the change in the Capex assumption.

DCF-based valuation: Our target price is INR 1,180 (WACC 11%, terminal growth 6%). The stock is trading at 40x FY25E EPS.

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