Piramal Pharma share price rises 8%: 3 key reasons why Jefferies expects more gains

Stock Market Today: Piramal Pharma share price gained more than 8% in intraday trade on Wednesday.

Piramal Pharma share price opened at ₹229.25 on Wednesday on the BSE, more than 5% higher than the previous closing price of ₹216.70. The Piramal Pharma share price thereafter went on to scale intraday highs of ₹235.35, marking gains of more than 8%.

Piramal Pharma share price has been rising, up more than 90% year to date, and analysts are expecting more gains.

Analysts at Jefferies India Pvt Ltd have given a target price of ₹260, which means more than 10% gains for the Piramal Pharma share price.

3 key reasons why Jefferies expects more gains

1. Piramal expects 2 times revenue growth and 3 times Ebitda growth by FY30: Piramal Pharma stated during its investor day that by FY30, it wants to increase its revenue by two times to $2 billion or more (constant currency growth) and by 3 times its earnings before interest tax depreciation and amortisation (Ebitda) with 25% Ebitda margins. Jefferies believes that revenue and Ebitda CAGRs (compound annual growth rate) of 12.2% and 20.3% are attainable.

2.Increasing share of innovator-focused CDMO contracts: This rise in the share of innovator-focused CDMO (contract drug manufacturing) contracts holds the key to overall margin improvement. Piramal Pharma believes that it will be able to outpace the market growth of 6-8% because of its integrated CDMO (58% of FY24 revenue) activities, which include service offerings throughout the molecule's lifespan and a global network of manufacturing facilities.

3. Steady growth for hospital generics and improving margin profile for OTC: It is the steady growth in developed markets and new launches in the Rest of the World markets that should help Piramal Pharma double the revenue of complex hospital generics business (which is 30% of FY24 revenue) by FY30 with steady margins of 25%.

Piramal’s CDMO division turnaround is progressing well, said Jefferies. The hospital generics business should be back on the growth path from 2HFY25, feels Jefferies, and India consumer healthcare profitability is also rising. It has thereby raised its FY25 and FY26 earnings estimates by 4% and 10%, respectively, on better margins for CDMO.

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Here are 3 key reasons why Jefferies expects more gains