JM Financial Initiates 'Buy' On Piramal Pharma Citing Robust Pipeline, Global Manufacturing Presence
Piramal Pharma's Contract Development and Manufacturing Organisation segment, which contributes 58% to its revenue, is the company’s growth engine, as stated in the report.
JM Financial Institutional Securities Ltd. has initiated coverage on Piramal Pharma Ltd. with a 'buy' rating, with a target price of Rs 340, implying a 36% potential upside. The stock is currently trading at a 38% discount to its listed peers, making it an attractive opportunity for investors, holds the brokerage.
Piramal Pharma's Contract Development and Manufacturing Organisation segment, which contributes 58% to its revenue, is the company’s growth engine, as stated in the report. Its advantages include:
A balanced mix of CRO (30%) and CDMO (70%) services.
Manufacturing facilities in the US, UK, and India.
Commercial capabilities across intermediates, APIs, and formulations.
A strong pipeline, including one asset with potential revenues exceeding $100 million.
The segment is expected to achieve a 17% compound annual growth rate over the next three years, supported by newly commercialised molecules, a rebound in the US biotech sector by the second half of the fiscal, and a turnaround in its CRO operations.
Piramal's consumer healthcare segment (12% of revenue) boasts a portfolio of over 25 brands, including household names like Lacto Calamine, Polycrol, Tetmosol, and Little's. Although high advertising and promotion expenses have historically weighed on margins, the business is on the verge of scaling up.
JM Financial projected a 13% CAGR for the segment over the next three years. Margin expansion is expected as the business matures.
Contributing 30% to revenue, Piramal's hospital generics business specialices in complex inhalation and injectable products with high entry barriers. With additional capacity for Sevoflurane in India and a pipeline of 24 injectable products, JM Financial projects the segment to grow at 11% CAGR over the next two fiscals.
Financials And Valuation
JM Financial expects Piramal Pharma's topline to grow at 15% CAGR from fiscal 2024 to fiscal 2027, while Ebitda is projected to increase at 23% CAGR.
At the current market price, Piramal trades at 21 times the fiscal 2026 EV/Ebitda ratio and 17 times that of fiscal 2027, well below the industry average. With India's Contract Research and Development and Manufacturing Organisation industry expected to double in the next three fiscals, Piramal is primed to benefit from the sector's growth, said the firm.
