Piramal Pharma soars 5% on hopes of turnaround in CDMO business

Shares of Piramal Pharma surged over 5 percent in the early trade on June 16 driven by expectations of a turnaround in the company’s contract development and manufacturing organization (CDMO) business in FY24.

Global research and broking firm Jefferies remains confident to see a significant margin expansion for Piramal Pharma led by its CDMO business on the back of the New Chemical Entity contracts bagged by the firm.

“Piramal Pharma’s CDMO business outlook is expected to improve
from the second half of FY24 as challenges over the last 12 months are resolved,” Jefferies stated in its report.

CDMOs are pharma companies that bag orders from clients and offer them a range of services from drug development to manufacturing.

The firm also highlighted that Piramal Pharma started FY24 on a strong note, with a healthy order book in the CDMO division, increasing Full-Time Equivalent demand in discovery and supply normalisation in complex hospital generics.

At 10 am, shares of Piramal Pharma were trading at Rs 95.90 on the National Stock Exchange, with gains of 4.1 percent from the previous close.

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The broking house also likes the drug maker’s complex hospital generics business, which is a steady cash cow. It also believes that Piramal’s consumer health business will likely turn EBITDA positive in FY24 on
the back of robust high-teen revenue growth.

“Operating leverage and lower base should help Piramal Pharma to hit high-teens EBITDA (earnings before interest, taxes, depreciation, and amortisation) CAGR (compounded annual growth rate) in coming years,” the firm forecasted.

Jefferies has a “buy” call for the stock, with a price target of Rs 115 in a base case scenario and Rs 155 in a bull case.

Expectations of inclusion on the FTSE index in the rebalancing later in the day also triggered some buying in the counter. The inclusion in the FTSE index is expected to bring inflows worth $12 million in the counter, Nuvama Alternative & Quantitative Research said.

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