Piramal Pharma share price jumps 4.5% after JM Financial issues ’buy’ rating, sees 36% upside | Stock Market News

Stock Market Today: Shares of Piramal Pharma rallied 4.50% in early morning trade on Tuesday, December 17 to ₹262.80 after domestic brokerage firm JM Financial, in its latest report, initiated coverage on the stock with a ‘buy’ rating and a target price of ₹340, indicating an upside potential of 36% from the stock’s last closing price of ₹251.

The brokerage’s bullish outlook is driven by the anticipated growth in India’s CRDMO (Contract Research, Development, and Manufacturing Organization) industry, where Piramal Pharma’s CDMO business stands out for its competitive edge among Indian peers, positioning it well to capitalise on the sector’s expansion.

Piramal’s CDMO business stands out among Indian peers due to several factors: a healthy mix of CRO and CDMO services (30:70), manufacturing facilities in the US, UK, and India; comprehensive commercial capabilities across intermediates, APIs, and formulations; a diversified customer and geographic base; and a robust pipeline that ensures strong revenue visibility.

JM Financial expects Piramal Pharma’s CDMO business to achieve over 17% CAGR growth over the next three years, driven by a CRO turnaround, a strong pipeline of Phase III projects, and newly commercialized assets, including one with a revenue potential of over USD 100 million.

The brokerage highlights that the company is the only listed Indian CDMO with a global manufacturing footprint. Its CDMO segment remains its largest revenue contributor, generating ₹47 billion in sales and accounting for 58% of FY24 revenues. Over the past three years, this segment has delivered a 9.4% CAGR, driven by contributions from both CRO and CDMO services.

According to JM Financial, India is rapidly establishing itself as a global manufacturing hub, with CRDMO companies leveraging key tailwinds such as the China+1 strategy, a revival in biotech funding, and cost leadership. These factors are increasingly attracting interest from big pharma companies.

The global CRDMO industry is projected to grow at a 9.1% CAGR between 2023 and 2028, expanding from USD 197 billion to USD 302 billion. Currently, North America (42%), Europe (25%), and China (13%) dominate the global market.

Despite holding just a 3.6% market share—one-fourth that of China—JM Financial believes that India’s CRDMO industry is on the cusp of significant growth. Despite the absence of a strong innovation ecosystem, the Indian CRDMO industry is expected to double in size within the next five years, providing immense growth opportunities for companies like Piramal Pharma, it said.

Stock trades at 38% discount to peers

JM Financial projects a 15% revenue CAGR and 23% EBITDA CAGR for Piramal Pharma over FY24-27, driven by the increasing contribution of its CDMO segment. The brokerage highlights that this growth will support healthy topline and EBITDA expansion, along with an improving margin profile.

According to JM Financial, the CDMO segment, combined with steady growth in the CHG segment and the scale-up of ICH, is expected to drive free cash flow (FCF) to ₹4.8 billion by FY27. This improvement is anticipated to enhance the company’s net debt/EBITDA ratio, alleviating investor concerns about its debt position.

The brokerage notes that, at the current market price, the stock trades at 21x and 17x FY26/27 EV/EBITDA, reflecting a 38% discount compared to the average valuations of listed peers.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.