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Motilal Oswal Report
Further uptick in sales in CDMO/CHG segment remains the key
Piramal Pharma (PIRPHARMA) delivered better-than-expected 4QFY23 performance, on revived traction in the Contract development and manufacturing operations (CDMO)/complex hospital generics (CHG) segment. PIRPHARMA is witnessing healthy increase in purchase orders in the CDMO segment and improved momentum in inhalation anesthesia (IA)/intrathecal portfolio within the CHG segment, which would enhance sales prospects over the medium term.
We raise our earnings estimate by 7%/3% for FY24/FY25 to factor in a) capacity expansion in the CDMO segment, b) increased production of CHG products by CMO partners, and c) increase in interest outgo.
After a sharp deceleration in performance over 9MFY23, PIRPHARMA has shown reasonable progress in profitability in 4QYF23. With increased demand and efficient production management, we expect PIRPHARMA to strengthen its performance over the medium term.
We value PIRPHARMA on an SOTP basis (10x EV/EBITDA of CDMO business, 10x EV/EBITDA for CHG, and 12x India consumer products (ICP)) to arrive at a price target of INR95. We reiterate our BUY rating on the stock.
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