Sequent Scientific - Worst Of The Disruption, Price Compression Behind: Yes Securities

Yes Securities Report

Post the episode of elevated input costs and demand destruction, along with steps taken to improve profitability leads us to believe worst of Sequent Scientific Ltd.'s margin and earnings performance is behind. That said, upgrade cycle may not start immediately as inflection point in active pharma ingredient still appears some time away.

We roll over to FY26 estimate which appears a more normalized representation of underlying steady state deliverables (~mid-teens growth and mid to high teens margin) and hence trim multiple to sync with normalized earnings.

Upgrade to Add with revised target price Rs145, based on 30 times (earlier 35 times) FY26 earnings per share.

Key risk to our constructive view is deceleration in API business, inability to increase API supplies to same customer and large sized merger and acquisition that would lead to increased leverage.

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