Is there any pricing power?
API manufacturers (customers of AMI) keep up to 3 vendors in different geographies (China, EU, India). The manufacturers ensures AMI competes with other suppliers for orders. The competition depends upon various factors including cost. AMI owns somewhere above 50-60% MS for their suppliers and going by the commentary, management aims to maintain that (so cost is going to be parameter here)
So is there no moat?
Management had previously clarified that the moat comes with the time of the project. As time progresses, the API manufacturer starts hesitating to change suppliers. However, that doesn’t mean manufacturers cannot. Management very honestly called out that the business can be replicated but technology/time will need to be invested.
Will pricing power come in the future?
Since AMI doesn’t want to end up competing with their customers they will unlikely make the final products. So there is going to be some pricing power but it has limitations.
Perhaps we should keep a watch as AMI grows or if comes up with something outsmarting competition.
Disclosure: I am invested in AMI organics. This is my understanding and I may be wrong. I may change my views or exit/add/sell my investment anytime.
| Subscribe To Our Free Newsletter |
