ICICI Direct Places Buy Call On This Mid Cap Pharma Stock, Sees 23% Potential Upside

Leading brokerage firm ICICI Direct in its recent report has placed a "buy" call on Syngene International Limited for a target price of Rs 710 per share. The brokerage sees a potential upside of 23% from its current level considering the given target price.

Syngene International is a contract research, development and manufacturing organisation catering mainly to global innovator pharma chemical companies offering integrated scientific services from early discovery to commercial supply. It is a mid-cap company having a market cap of Rs 23,229.01 crore.

Business Update

Syngene serves these players, which outsource some or substantial part of their business in the product development life cycle and operates via full-time equipment (FTE) and fee-for-services (FFS) models.

Discovery services: FTE engagements with high renewability; dedicated services: long-term strategic alliances that last usually five years or more, Development and manufacturing: FFS engagements, which increase in volume/scale over time.

Stock Outlook & Returns

The Current Market Price (CMP) of Syngene International stood at Rs 578.65 per share on NSE. Its 52-week low is Rs 510.05 recorded in May 2022, and the 52-week high is Rs 683 recorded in April, respectively.

The stock in the past 1 week has surged 5.06%, whereas, in the past 3 months it fell by 3.38%. Over the past 1 year, it fell 2.85%, giving a negative return. However, in 3 years, it has given 74.16% positive return. The stock in the 5 years gave a multibagger return of 129.12.

Q1FY23 Results

• Beat on estimates led by robust demand across board. 
• Revenues grew 25.9% YoY to Rs 768.1 crore, EBITDA margins de-grew 89 bps YoY to 28.3%, EBITDA was at Rs 216.5 crore.
• Net profit was at Rs 102 crore (up 4.7% YoY).

 

Buy for a target price of Rs 710 per share

Syngene's share price grew 1.7x over past three years. "We maintain BUY as the recent Zoetis agreement provides vindication on Syngene's capabilities, which could be an inflection point to evolve from clinical scale to commercial scale manufacturing for innovators. We value Syngene at Rs 710 i.e. 25x FY24E EV/EBITDA," the brokerage has said.

Key triggers for future price performance

• Regulatory approvals from regulated markets for Mangalore facility (FY24) and Librela manufacturing for Zoetis (H2FY23).
• Multiple year extension of Amgen, BMS, Baxter contracts make it well poised to capitalise on growing opportunities globally.
• SynVent, Syngene's Integrated Drug Discovery (IDD) platform's ability to expand business from existing clients and attract new clients.
• Expansion of Biopharma manufacturing business by commissioning cGMP microbial facility and expanding the mammalian cell manufacturing facility.

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.