ICICI Direct Upgrades Rating From HOLD To BUY On Small Cap Pharma Stock, Sees 20% Gains In 12 Months

ICICI Direct upgrades its rating on Suven Pharmaceuticals Limited from HOLD to BUY for a target price of Rs 530 per share. Investors with the given target price can anticipate a potential upside of up to 20% from its current level. Suven Pharmaceuticals is a Small Cap Pharmaceuticals company with a market capitalization of Rs 11,231.41 crore.

Stock Outlook & Returns

On NSE, the stock is currently trading at Rs 444.05 per share, trading 0.65% up as compared to its previous close of Rs 443 per share on NSE. According to the data on NSE, the stock recorded its 52 week high on 29 March 2022 at Rs 631.75, and its 52-week low on 18 October 2022 at Rs 390.50, respectively.

The stock in the past 1 week has given 6.75% positive returns. In the past 1 and 3 months, the stock has given 6.02% and 1.34% positive returns on investments. However, in a year, the stock has given 13.3%. negative returns. The stock made its debut on the stock exchange on 09 March 2020, and since its listing it ahs given a multibagger return of 163.84%.

Business Updates

Dedicated CRAMs supports the global life sciences industry and fine chemical majors in their NCE development endeavours. Its services include custom synthesis, process R&D, scale up and contract manufacturing.

In Q2FY23, CRAMs pharma vertical contributed 39% of sales. Besides pharma CRAMs, Suven has also developed and supplied intermediates/technical for specialty chemicals CRAMs, which accounted for 54% of sales. Generic formulations accounted for 7% of sales. Suven is currently on a three pronged investment plan, 1) relocating R&D centre, 2) replacement and upgradation of blocks at Suryapet facility and 3) additional new block in line with FDA regulations at Pashamylaram facility.

Muted Q2 numbers due to de-growth in pharma CRAMs, which was offset by growth in speciality chemical CRAMs. Revenue declined 7.5% YoY to Rs 278 crore. EBITDA was at Rs 100 crore, down 18% YoY with margins at 35.9%. Consequent PAT was at Rs 72.2 crore (down 25.6% YoY).

Buy for a target price of Rs 530 per share

Suven's share price has grown by ~1.4x over the past two years (from ~Rs 320 in November 2020 to ~Rs 446 levels in November 2022). "We upgrade from HOLD to BUY as recent correction in the stock provides reasonable upside in the backdrop of a revival in pharma. CRAMs inquiries and stable outlook for specialty chemicals CRAMs. Valued at Rs 530 i.e. 30x P/E on FY24E EPS of Rs 17.7," the brokerage has said.

Key triggers for future price performance

Focus on research by global innovators has intensified post-Covid and augurs well for pharma CRAMs operations that remains a key growth driver.

Progress of molecules across the development journey and high-value, high-margin business, involving the commercial supply of intermediates (for five molecules) to clients.

Progress on specialty chemicals on the CRAMs fronts with current execution of two molecules. Ongoing development of other molecules

Formulations: Supplies from OSD facility of Casper Pharma and subsequent operational performance in ramping up filings in this segment.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.