Concord Biotech: Citi Reinitiates Coverage With 'Neutral' Amid API Growth Slowdown

Citi Group has reinitiated coverage on Concord Biotech Ltd. with a 'neutral' rating and a target price of Rs 2,330 per share. This rating comes after a period of suspension, reflecting cautious optimism for the company.

Concord Biotech operates with a unique, high-value fermentation API business model, which boasts cost and market leadership in its niche. Historically, the company has seen strong growth in its API segment. However, over the past 18 months, growth in Concord's API segment has slowed, the brokerage said in its note on Wednesday.

API segment sales have experienced a decline of around 9% in financial year 2024 and 3% in the first half of financial year 2025. This slowdown is attributed to a combination of internal factors, such as the cannibalisation from the company's growing formulation division, and external industry-wide challenges, including a slowdown in API demand as customers have delayed procurement.

While the formulation division has helped mitigate the slowdown by achieving impressive growth, particularly in emerging markets and India, a recovery in the API segment remains crucial for a more constructive outlook, Citi said in its note.

Looking ahead, Concord Biotech aims to drive growth through new API segments, including immunosuppressants, oncology, and anti-bacterial products. The company has a promising pipeline of 8-10 new products slated for commercialisation within the next three-four years. Additionally, Concord's Gujarat, facility, which recently cleared an FDA audit, has unlocked new global market opportunities.

Concord Biotech is trading at 36 times/29 times FY26E/27E EV/Ebitda, which reflects a premium over other leading API players like Laurus Labs Ltd., but remains at a discount to sector leader Divi's Laboratories. According to the brokerage, the company's strong business model, growth potential, and healthy return ratios make it an attractive player in the API space, though risks remain tied to margin pressures and a further slowdown in the API market.

According to the note, key risks include upside potential from stronger API performance, particularly in oncology and anti-infective segments, and downside risks from margin erosion due to continued API slowdowns.