'Buy' Akums Drugs And Pharma Maintains ICICI Securities, Sees 39% Upside — Here's Why

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ICICI Securities Report

FY26 could be a year of recovery for Akums Drugs and Pharmaceuticals Ltd. led by pricing stability in its contract development manufacturing organisation business and reducing sales exposure towards loss-making units of active pharma ingredient and trade generics.

Akums in Q3 witnessed a recovery in CDMO volumes (last twelve months growth at 1.6% YoY). The traction is likely to be maintained led by its strong orderbook, stability in prices and commercialisation of new injectable and hormones facility.

The company is focusing on improving product mix by inching up sales of differentiated products in CDMO. Akums has entered into a euro 200 million (Rs 17.6 billion) partnership with a global pharmaceutical company for manufacturing and supplying a range of pharmaceutical formulations for the European market.

Akums shall receive an upfront payment of euro 100 million (Rs 8.8 billion) to support product development and secure European regulatory approvals for its oral liquid manufacturing facilities. The collaboration also involves the supply of multiple stock keeping units for oral liquid formulations over CY27–32, which would be marketed by the partner company across various European countries. Mix improvement in CDMO segment, curbs in losses in API biz and exposure towards trade generics may help the company deliver a 160bps expansion in margins over FY25-27E.

We expect Akums to post revenue/Ebitda/PAT CAGR of 14.9%/ 22.3%/32% over FY25–27E with 160bps jump in Ebitda margin to 13.6% in FY27E. At current market price, the stock trades at 22.1x/16.4x FY26E/27E EPS of Rs 23.1/Rs 31.2, respectively.

We retain Buy with an unchanged target price of Rs 710, valuing the company at 23x FY27E earnings.

Key downside risks: Volatility in API prices, delay in cost curbs in API division and regulatory hurdles.

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