BackPiramal shares rise as Jefferies initiates coverage with Buy, sees potential rerating
A combination of healthy growth, rebalancing of portfolio and vertical-split can aid re-rating, Jefferies said
PremiumJefferies has initiated coverage on Piramal Enterprises (PEL) with a ‘Buy’ rating on the stock as it believes that the recent Dewan Housing Finance Corporation (DHFL) deal helps Piramal rebalance its portfolio and offer a strong growth platform in housing.
Jefferies' bullish stance on Piramal comes with a price target of ₹3,050 per share, with an upside scenario target of ₹3,550 and downside scenario of ₹2,141. A combination of healthy growth, rebalancing of portfolio and vertical-split can aid re-rating.
“PEL's recent DHFL deal has raised its retail mix to 36% from 12%. A wide distribution with branch-reactivation and strong housing demand should drive 28% CAGR in retail loans over FY22-24e lifting retail loans' share to 50% of total by FY24. Unwinding of wholesale book will weigh on overall loan growth in the near-term; we see loan growth accelerating from 8% YoY in FY23 to 14% in FY24," the note stated.
Further, those at Jefferies believe that CDMO segment should emerge as key growth driver for Pharma business. Piramal Enterprises differentiates itself with diversified manufacturing footprint including in western geographies, closer to the client. Piramal CDMO has 36 molecules in Phase-III which puts the company in a comfortable position on revenue visibility.
Complex hospital generics continues on the path to recovery post-pandemic. India Consumer Healthcare business looks to attain scale of ₹10 billion revenue p.a before striving to turn profitable, it added. Though, Jefferies sees slower retail ramp-up, lower recoveries, slowdown in CDMO opportunities, and segmental disclosures as key risks.
Shares of Piramal Enterprises were trading more than 2% higher on the BSE at ₹2,571 apiece in Tuesday's afternoon deals.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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