Syngene International Q1 Results Review - Likelihood Of Growth Surprise Drives An Upgrade: Yes Securities

Yes Securities Report

Syngene International Ltd.'s management highlighted RFP flows up 50% YoY albeit on a low base and indeed Q1 has been the best Apr-June period for such proposals in the last four years.

Company reiterated its confidence that biotech funding is improving which implies H2 and FY26 should see a better environment. While Q1 result came in weaker than expected with sharp fall in gross and Ebitda margin (owing to higher manufacturing share), management retained its full year revenue and margin guidance range.

We have stayed cautious on the stock since at least previous 18-24 months as company navigated a broader CDMO slowdown, lack of growth acceleration and limited margin upside.

We believe the first and second issues are now likely to see a reversal as narrative of a biotech funding rebound gains prominence and company highlighted best ever Q1 quarter for RFPs in last four years.

We reckon the rebound next year might lead to a growth surprise which is why we have revised FY26 revenue upwards by ~170 bps and upgrade to Add from Reduce. Our revised target price stands at Rs 900 (earlier Rs 650) based on 45 times (earlier 34 times) FY26 EPS and believe downgrade cycle of last 12 months is behind us.

Reckon a changing FY26 growth expectation and worst of biotech woes being behind can result in a higher target multiple which we have incorporated in our view.

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