Shares of Piramal Pharma have had a rough time at the bourses. The Piramal Group company that demerged from Piramal Enterprises last year has slumped over 20% since the start of the year. But analysts at Nuvama expect a strong recovery in the overall business in subsequent years.

The Piramal Pharma Analyst: Thakur Ranvir Singh-led analyst team at Nuvama initiated coverage on the stock with a ‘buy’ rating and a price target of ₹130. The target indicates an over 41% upside from the stock’s last closing price of ₹91.85.

The Piramal Pharma Thesis: The firm in its note released earlier this week said that the company is seeing a rise in order inflows as macro headwinds subside. The note adds that the manufacturing base is also returning to normalcy after facing higher attrition post the lifting of COVID-related restrictions.

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The analysts said that while the company’s EBITDA plummeted to 8.9% in FY23 from 14% in FY22 they expect the EBITDA margin to improve to 15.6%/16.7% in FY24/FY25. The analysts opined that the margin improvement will be on the back of these three factors:

• Higher contribution from on-patent products and services,
• Operating leverage on scaling up of operations in the ICH(India consumer healthcare) business,
• Passing on a part of the price hike in input and energy costs in commercial manufacturing and the CHG (complex hospital generics) business.

The brokerage firm further said that the company’s presence in niche segments like highly potent APIs, complex OSDs, sterile injectables, peptides, antibody-drug conjugates, biologics, and vaccines, offer attractive opportunities in respective markets. “We expect an improvement in the macro-environment over the next 12 months,” the analysts added.

Price Action: Piramal Pharma’s share price was down 0.05% to trade at ₹91.80 in the early hours of trading on Friday.

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