Nomura initiates Anthem with 'Buy', sees strong long-term CRDMO runway

The brokerage cited the company's strong positioning in India's fast-growing CRDMO space, high profitability and disciplined execution as reasons for its bullish view

Nomura has initiated coverage on Anthem Biosciences stock with a ‘Buy’ rating and a target price of ₹740 per share, implying 18 per cent upside from Thursday’s close of ₹627.05. 

 

The brokerage cited the company’s strong positioning in India’s fast-growing contract research, development and manufacturing organisation (CRDMO) space, high profitability and disciplined execution, as reasons for its bullish view. Further, Nomura expects Anthem to benefit from structural growth in the CRDMO industry and believes the recent stock correction has improved the long-term risk–reward profile.

Anthem well placed in a faster-growing India CRDMO market

Citing Frost & Sullivan, Nomura notes that India’s CRDMO industry is projected to grow about 13 per cent annually to $15.4 billion between CY2024 and CY2029, outpacing the global CRDMO industry’s 9 per cent growth.

 

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Within this, established Indian players such as Anthem are expected to grow even faster, at around 17 per cent over the period, Nomura estimates.

 

Anthem operates as an integrated CRDMO with capabilities across both small molecules and large molecules (biologics), and offers end-to-end services spanning drug discovery, development and manufacturing.

 

It is also among the few Indian CRDMOs with experience in newer modalities such as antibody-drug conjugates (ADCs), RNAi, peptides and oligonucleotides.  ALSO READ | Jefferies backs Lenskart with 'Buy' despite muted market debut; here's why

Differentiated model, niche portfolio and strong franchise

Nomura highlights several aspects of Anthem’s business model:

• Research services: This segment contributed around 11 per cent of FY25 revenue. Anthem has built deep client relationships using a fee-for-service (FFS) model, unlike many peers that rely more on full-time equivalent (FTE) contracts.
• Generic specialty ingredients: Accounting for about 18 per cent of revenue, this portfolio is “niche”, including enzymes, fermentation-based products, GLP-1 peptides and biosimilars.
• Client base: Starting in 2006 as a partner to small and emerging biotech firms, Anthem now serves a broader mix of both large and small pharma companies.
• Organically built, cohesive platform: Operations are largely concentrated in one city, with stable leadership and employee attrition below most industry peers.

This combination, Nomura notes, has translated into strong operating performance, with industry-leading margins and return ratios.

Earnings outlook: Short-term moderation, medium-term acceleration

Nomura models robust growth for the company over the next three years, albeit with some near-term moderation from a high base. Revenue growth is expected at 14 per cent/18 per cent/22 per cent in FY26F/FY27F/FY28F and overall earnings growth is anticipated at 27 per cent/ 21 per cent/26 per cent over the same period.

 

Revenue growth is expected to slow in the near term, before picking up again in FY27F–FY28F as base products grow steadily and new launches ramp up.

 

The brokerage is constructive on the medium-term outlook, supported by:

• Steady end-market demand for key molecules
• Launch of new products
• Ongoing capacity expansion

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Valuation: Premium justified, risk–reward seen favourable

Nomura’s target price of ₹740 is based on 50 times its December 2027F earnings per share (EPS) estimate of ₹14.8. It pegs a fair value band at 40–60 times, arguing that a premium to other Indian peers is warranted, as the company has a very low contribution from the non-CRDMO segment, high profitability, a good execution record with control on cost and disciplined capital allocation, and a steady medium-term growth outlook.

 

The brokerage believes the recent share price correction leaves risk–reward attractive for long-term investors.

Key risk

The main risk Nomura flags is Anthem’s reliance on a few key products. It estimates that the top two products could account for 36–38 per cent of revenue during FY26–FY28, which could introduce near-term earnings volatility if demand or pricing for these products is disrupted.  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.