Buy This Small-Cap B2B Stock With Rs. 340 Target Price, Major Supplier Of APIs: ICICI Direct Suggests

ICICI Direct, a reputed brokerage firm has suggested investors to buy the stocks of Hikal Ltd. The company's share price has grown around 1.8x over the last 3 years.

Hikal Ltd.: Target Price, Current Market Price, and Company Performance

The Current Market Price (CMP) of Hikal Ltd. is Rs. 293. ICICI Direct has estimated a Target Price for the stock at Rs. 340. The stock has the potential to give a 16% return, in the upcoming 1 year. This is a small-cap company with a market capitalization of Rs. 3,652 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 293
Target Price	Rs. 340
Potential 1 year return	16.00%
52 week high share price	Rs. 742
52 week low share price	Rs. 280.35

The company has reported a muted quarter amid headwinds in pharma and crop protection. Revenues have declined 6% YoY to Rs. 502.4 crore, EBITDA was at Rs. 61 crore which has fallen by 44% YoY with margins at 12.1%, and the consequent PAT stood at Rs. 21 crore which has faded by 59% YoY.

ICICI Direct Speaks about the stock advantages

Amid a muted financial performance, the brokerage firm has given Hikal's stocks a 'buy' rating. Mentioning the reasons, ICICI Direct said, "We maintain BUY despite near-term headwinds as we continue to believe in the company's execution prowess, visibility Capex and the management's expectation of gradual business normalization in both segments. Recent steep correction continues to offer a decent risk-reward proposition. That said we continue to monitor developments on recent critical issues Surat (Gujrat) GIDC incident and MPCB notice for Taloja." ICICI has valued the stock at 18x P/E on FY24E EPS of Rs. 19.

In addition to that, Capex progress in both pharma and crop protection has been experienced by the company. The company had undertaken margin improvement on the back of several cost rationalization and efficiency improvement measures during the pandemic. Also, the company has received a manufacturing license for the production of APIs at Panoli site, to resume post validations over the next quarters, which is expected to develop the company's growth rate. However, raw material challenges can continue.

Company profile: Hikal Ltd.

Hikal, established in 1988, is a small-cap B2B player that provides intermediates and active ingredients to global pharmaceutical, animal health, crop protection, and specialty chemical companies. Pharma and crop protection are 58% and 42% of operating revenues, respectively. The pharma business is currently divided into a 50:50 ratio of APIs and CDMO. Animal health business accounts for 20-25% of CDMO business. In crop protection, 69% of revenues are derived from CDMO while the remaining is from proprietary products, specialty chemicals & specialty biocides.

It is one of the largest suppliers of Gabapentin API (CNS) and in crop protection, one of the largest suppliers of Thiabendazole (TBZ), as ICICI informs. The company was is the first Indian life sciences company to receive the Responsible Care certification granted by the International Council of Chemical Associations (ICCA).

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. 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.