Buy This Small Cap Pharma Stock For Gains Up 26%, Target Price Rs 955: ICICI Direct

ICICI Direct suggests buy Caplin Point Laboratories Ltd. for a decent return up to 26% with a target price of Rs 955 per share. It is a small-cap pharmaceuticals company having a market cap of Rs 5,733.17 crore. Caplin Point derives entire revenues through exports with 90% of revenues from Emerging Markets (LatAm + RoW) where it has an end-to-end business model through last-mile logistical solutions for its exclusive distributors.

In the US, Caplin has filed 26 ANDAs on its own and through partners and received 19 approvals (five with partners) till date. For LatAm markets, it outsources ~45% of products (China: 30%; Indian vendors:70%) and in-house manufacturing of the remaining ~55%. Caplin Steriles caters to the rapidly growing demand for injectable products in US and other regulated markets.

Stock Outlook

The current market price of the Caplin Point's stock on NSE is Rs 752.05 per share, trading 2.83% up from its previous close. Stock today opened at Rs 735.65 per share. Its 52-week high is Rs 889.70 and the 52 week low is Rs 626, respectively.

The shares surged by 2.28% in a week. Whereas, the stock in the past 1 month has given a positive return of 6.37%. However, in the past 3 months, it has fallen 4.92%, and in 1 year, 12.54%, respectively. Whereas, in the past 3 and 5 years, it has given 98.88% and 13.08% positive returns, respectively.

 

 

Q2FY23 Results

Growth was driven by ~74% growth in the US. Sales were up 18.3% YoY to Rs 359 crore. EBITDA was at Rs 106 crore, up 4.4% YoY with margins at 29.4%. Consequent PAT was at Rs ~92 crore (up 22.3% YoY).

Buy for a target price of Rs 955 per share

Caplin's share price has grown by ~1.9x over the past three years (from ~Rs 377 in November 2019 to ~Rs 731 levels in November 2022). Maintain BUY due to 1) steady growth from legacy LatAm markets and increasing footprints in other geographies, 2) traction from visible order book in US, and 3) calculated capex decisions to expand capacity, widen portfolio and backward integration. Valued at Rs 955 i.e. 18x P/E on FY24E EPS of Rs 53.2.

 

Key triggers for future price performance

Execution of the ~Rs 450 crore+ capex towards Caplin Steriles, RoW facility, oncology (OSD & injectable) project and API backward integration.

Overall development pipeline for US remains robust, with 55+ ANDAs under development with addressable market in US ~ US$ 5 billion.

Growth momentum to persist mainly due to further expansion in front end, increasing product basket, change in product mix, launching of own brands.

Plans to expand in six major markets of US, Mexico, Brazil, Europe, South Africa and CIS countries with differentiated strategies. Additionally, Caplin is forming domestic market sales team focused on niche hospital injectable.

 

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.