Rossari Biotech Ltd. share price target

Management has guided for ~15% revenue growth in FY27 despite a stronger Q1 run rate, reflecting caution on geopolitical and input cost uncertainties.

Rossari Biotech (Rossari)’s Q1FY27 EBITDA grew 18.8% YoY; however, the company’s margin profile remains constrained due to limited availability of EO, raw-material volatility, and losses in its institutional and B2C businesses.

Rossari Biotech closed FY26 on a strong footing, reporting its highest-ever quarterly revenue and EBITDA in Q4, with consolidated revenue from operations for the full year at INR 2,396.4 crore up 15% YoY, driven primarily by volume.

Rossari’s Q4 EBITDA grew 11.2% YoY, while gross/EBITDA margins shrank QoQ due to inferior mix. Rossari has outlined its focus areas for FY27. Grow profitably by improving sales in the high-margin categories of pharma, aroma and personal care; separately, the company plans to exit its low-margin B2C business.

The near-term headwinds—muted domestic demand, elevated employee costs, and gestation-led pressure from new capacities—are likely to keep earnings growth and return ratios subdued over the next few quarters.

Rossari Biotech continues to execute well operationally, leveraging R&D intensity and export expansion to offset pricing headwinds.

Rossari Biotech’s Q1FY26 revenue grew by 11.0% YoY (-6.2% QoQ) to INR 5,437 Mn., in-line with our estimates, the growth was entirely driven by volume expansion of 11.0% YoY.

HPPC business and capex to drive growth

We expect it is likely to deliver 18%/22%/25% revenue/EBITDA/PAT CAGRs over FY25-27 due to swelling demand, capacity expansion and mounting exports.

Rossari Biotech’s (Rossari) Q2FY25 HPPC revenue growth (+6.2% YoY) was hurt from softer demand and restricted ethylene oxide (EO) capacity.

Rossari Biotech is a leading specialty chemicals manufacturing company, focusing on four core chemistries of enzymes, silicones, acrylics and surfactants. It caters to industries such as home and personal care, and performance chemicals (HPPC), textile specialty chemicals (TSC) and animal health and nutrition (AHN) products

HPPC and capex to drive growth

HPPC business and capex to drive growth

Signs of a recovery in sight

Rossari Biotech’s (Rossari) Q2FY24 HPPC revenue (+21% YoY) was led by a volume push which has hurt prices and margins. Despite rise in utilisation from 50-55% to >75%, EBITDA margin dipped 100bp QoQ to 13.1%. It has chosen to play volume game for FY24 to drive utilisation, and expects to improve margins as plant utilisations stabilise at higher levels, which in our view can cap return ratio in near term.

Rossari Biotech’s (Rossari) Q1FY24 revenue dipped 5.5% YoY to Rs4.1bn due to drop in raw material prices, while volume grew ~20% YoY. Gross profit margin dipped 10bps QoQ despite softening raw material prices as the company focused on growing volumes and driving operating leverage. EBITDA margin has improved 70bps QoQ to 14.1%. Rossari expects revenue growth of 12-14% and EBITDA margin at 14% for FY24 despite a weak Q1FY24.

Signs of a recovery in sight

Rossari Biotech’s Q4FY23 revenue dipped 7.4% YoY (rose 4.4% QoQ) to Rs4.1bn due to drop in raw material prices. However, we were disappointed by a 40bps QoQ contraction in gross profit margin to 29.6%. EBITDA growth therefore was just 4.3% YoY.

Rossari Biotech’s Q3FY23 performance disappointed with 9.1% YoY / 8.5% QoQ dip in revenues to Rs3.9bn. However, EBITDA margins showed recovery, up 60bps QoQ to 13.9%. Revenues were hurt due to multiple reasons: 1) lower realisation as a result of softening raw material prices; 2) complete exit of a large customer; 3) underlying headwinds for textile industry; and 4) muted performance by acquired companies.

Synergies and product introductions to drive long-term growth