 "This pharma stock has zoomed 179% so far in CY24; Antique sees more upside")
Shilpa Medicare stock rises: Shares of pharmaceutical company Shilpa Medicare (SML) hit a new high of Rs 922, gaining 4 per cent on the BSE in Monday’s intra-day trade after the brokerage firm Antique Stock Broking initiated coverage on the stock with a 'Buy' rating and a target price of Rs 1,300, valuing the company at a price-to-earnings (P/E) multiple of 25x on H1FY27 earnings per share (in line with its 10 year mean multiple).
In the past one month, the stock price of pharmaceutical company has outperformed the market by surging 36 per cent, as compared to 3.3 per cent rise in the BSE Sensex. Thus far in the calendar year 2024 (CY24), the market price of this smallcap stock has zoomed 179 per cent, as against 15 per cent rally in the benchmark index.
SML is engaged in the manufacturing of Active Pharmaceutical Ingredient (API), Formulation and Development service. The company is presently dealing in high-quality APIs, Intermediates, Formulations, New Drug Delivery Systems, Peptides / Biotech products and Specialty Chemicals etc. using sophisticated technology meticulously to comply with laid down international standards/ specifications. Currently, SML is among the world’s leading suppliers of Oncology/Non-Oncology APIs and intermediates.
In its financial year 2023-24 (FY24) annual report, SML said that the company is actively engaged in expanding its formulation portfolio, particularly in oncology, to address the rising cancer cases in India and globally. With a large number of products in Shilpa’s API portfolio getting genericized between 2025 and 2028, the management expects business from commercialization of these molecules to sustain growth momentum.
Last year in September, the government launched the National Policy on Research and Development and Innovation in the Pharma-MedTech Sector, alongside the Promotion of Research and Innovation in Pharma MedTech Sector (PRIP) scheme. The government also initiated production-linked incentives for 35 different APIs in order to reduce import dependency and strengthen domestic manufacturing capabilities16. This strategic move addresses the disruptions caused by the pandemic and is poised to enhance the self-sufficiency of the Indian pharmaceutical sector.
According to analysts at Antique Stock Broking, over the years, SML has committed a large capex to its current and future growth driver’s viz. Contract Development and Manufacturing Organization (CDMO), Novel Drug Delivery System (NDDS) for formulations, Biosimilar, and Recombinant Human Albumin (rHA) segment. The company, analsyts said, has taken large strides into building its NDDS-led formulation pipeline, with launches lined up in FY25/26.
The brokerage firm believes SML's growth story has entered a new phase on the back of sustainable revenue growth coming from FDF and APIs coupled with the CDMO business being on the cusp of a major growth phase. With aggressive capex investments behind, analysts believe, SML's pipeline monetisation can lead to a revenue growth compound annual growth rate (CAGR) of about 34 per cent over a two-year period, with an Ebitda margin of about 35 per cent by FY27 and EPS CAGR of over 100 per cent (on a low base).