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Sharekhan Positive On This Pharma Stock For 22% Upside, Recorded Double-Digit Revenue Growth

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Brokerage firm Sharekhan has given a positive rating to the stock of Caplin Point Laboratories Ltd. The company reported a strong Q2FY2023 performance. Revenue and PAT reported double-digit growth, backed by strong growth across geographies.

 

Stock Target Price

Stock Target Price

The Current Market Price (CMP) of Caplin is around Rs. 763. Sharekhan has estimated a Target Price for the stock at Rs. 930.86. This stock has the potential to give a 22% return, in the upcoming 12 months. This mid-cap stock has a market capitalization of Rs. 5,578 crore.

Stock Outlook 
Current Market Price (CMP)Rs. 763
97Target PriceRs. 930.86
Potential Upside22.00%
52-week high share priceRs. 888
52-week low share priceRs. 626
Q2FY23 financials
 

Q2FY23 financials

The company's While operating profit margin (OPM) contracted, double-digit topline growth led to benefits in operating leverage and higher other income, resulted in double-digit PAT growth. Revenue and PAT grew by 18% and 21% to Rs. 359.3 crore and Rs. 92 crore, respectively (OPM decreased by 393 bps to 29.4%). Its gross margin stood at 54.3% in H1FY2023. Management expects gross margins to improve in the second half of the year. Overall, it expects gross margins to stand at 55%.

Strong expansion platform

Strong expansion platform

Caplin's plans to strengthen its presence in existing LATAM markets through tapping new geographies, increasing penetration in existing markets, and expanding its product portfolio coupled with expected strong growth in the regulated markets of the US are key growth drivers. Further, plans to enter new geographies along with possible inorganic opportunities in the API space (if materialised) could be long-term drivers.

Key upside

Key upside

Caplin's current order book for FY2023 is Rs. 175 crore, not including profit share and other licensing/milestone revenue. It targets revenue of Rs. 200 crore for FY2023. Overall product development pipeline stays robust in the US with 55+ ANDAs under development offering an addressable market size of US$5bn. The company has completed layout finalisation for a new Oral Solid Dosages plant in Thervoy SIPCOT, near Chennai.

Stock valuation

Stock valuation

Sharekhan mentioned that Caplin is undertaking capacity expansion, which provides growth visibility. The stock has corrected by 9% in the last four months and is currently trading at attractive valuations of 17.1x/14.5x its FY2023E/FY2024E EPS. The brokerage firm retain the Positive view on the stock and expect a 22% upside.

Disclaimer

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

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