Stock Of The Day: Piramal Pharma May See Valuation Re-Rating, Says Jefferies—Analyst View, Key Levels
The brokerage maintained a 'buy' rating as it sees the stock's valuations as attractive when compared to its peers.
Shares of Piramal Pharma Ltd. jumped on Tuesday after Jefferies expected a valuation re-rating given that both revenue and margin would grow in fiscal 2025.
The brokerage maintained a 'buy' rating as it sees the stock's valuations as attractive when compared to its peers.
Shares of the company gained 7.5% intraday, compared to a 1.18% fall in the benchmark BSE Healthcare. The stock has risen 83.37% in the last year.
Key Levels To Watch
Resistance level: Rs 149 per share (two-month high).
Support level: Rs 119.25 per share (one-day low).
Rational For Re-Rating
Piramal is trading at an attractive valuation of 13 times/11 times FY25/26 EV-Ebitda, which is significantly lower than the peer group, according to Jefferies.
The brokerage expects a valuation re-rating as the company improves its contract development and manufacturing organisation mix towards innovation driven products, which provides superior revenue growth visibility and a better margin profile.
"With macro uncertainty around outsourcing emanating over the last few months, the key debate with investors is the FY25 revenue/Ebitda growth guidance for Piramal," it said.
Jefferies foresees 12.5% revenue growth in FY25 but says the company can do better. Piramal expects 30% Ebitda growth, with margins expanding from 13.9% in FY24 to 16% in FY25.
It also estimates 12.2% revenue growth for CDMO in FY25, on the back of contract wins in anti-body drug conjugates, peptides and hormones.
The 15% revenue growth will drive 45% Ebitda growth in FY25. Deviation from the base-case scenario will largely be led by CDMO contracts, especially those catering to innovation, Jefferies said. Here, 45% of CDMO revenue comes from innovation, compared to 35% in FY21.
In a bearish scenario of 10% year-on-year revenue growth in FY25, the Ebitda growth should be 11%, as there won't be any benefit from operating leverage, the brokerage said.
Street View
All seven analysts tracking the company maintain a 'buy' rating on the stock, according to Bloomberg data.
