Experts put 'Buy' rating for Suven on increased chemical supplies
Risks: Currency fluctuations, delay in new orders from clients
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ANALYSTS have upgraded Suven Pharmaceuticals to a 'Buy'. After assessing the performance of the company, they reported the following: FY21e/FY22e/FY23e profit after tax (PAT) at 3.7 per cent/3.5 per cent/4.4 per cent and expect earning per share (EPS) of Rs14.7/17.8/21.2. They set a higher purchase price target of Rs 594 (earlier it was Rs 375), according to an analytical report by Anand Rathi Equity Research group.
Strong 53.8 per cent/96.2 per cent sales/PAT growth in Q3 FY21 led to full recovery for Suven's 9M FY21, otherwise hit by the Covid pandemic. Its 50 per cent EBITDA margin expanded 568bps yoy due to more supplies for clinical stage molecules. Management has maintained its FY21 overall 15-20 per cent profit growth guidance.
A strong, 20.1 per cent, Compound annual growth rate (CAGR) over FY20-23 in sales, driven by more orders is expected. The company has initiated commercial supplies for two specialty-chemical products and one in the pharmaceutical division. The company has launched of 3-5 formulation products in the year.
In Q3 FY21, the contract development and manufacturing organization (CDMO) pharma division grew 175.2 per cent yoy to Rs 2.2 billion as on the re-initiation of supplies for molecules in clinical trials. Specialty CDMO sales fell 49.5 per cent to Rs 347million. Management is confident of initiating commercial supplies for one specialty chemical molecule each in Q1 FY22/FY23 and one in pharma in FY22. We expect 20.6 per cent/13.1 per cent sales CAGRs in its CDMO pharma/specialty chemicals divisions over FY20-23, the report added.
Q3 FY21 sales of formulations and other services were Rs 126 million and Rs 107 million respectively. The company has so far launched five ANDAs and plans one in Q4 FY21 and 3-4 products in FY22. We expect this category to grow 36.4 per cent over FY20-23.
At the current market price (CMP) of Rs 314, the stock trades at 35.1x, 29.1x and 24.4x for FY21e/FY22e/FY23e respectively.
(Source: Anand Rathi Equity Research)
