ICICI Direct feels despite a significant run up, there is still scope for upside as the company is still trading at significant discount to some leading players in the space dealing with innovators.
Shares of Suven Pharmaceuticals were locked in 10 percent lower circuit on June 24 after showing massive rally in previous five consecutive sessions.
The stock closed 9.99 percent lower at Rs 470.60 on the BSE. However, it had rallied 61 percent consistently during June 17-23, 2020.
Post de-merger, the pharma business will be largely driven by two cash cow segments i.e. innovative CRAMS and speciality chemicals, said ICICI Direct which has a buy rating on the stock with a target of Rs 690, implying 32 percent potential upside from current levels.
Suven Life Sciences had announced a demerger of its CRAMS business in January, 2020 to be held by the demerged entity, Suven Pharma (SPL), while Suven Life will continue to hold the discovery research segment and IPs. Subsequently, Suven Pharma shares got listed on Indian bourses on March 9, 2020.
With strong margin profile (up 40 percent) without the R&D burden of innovative pipeline, the free cash flow is likely to remain strong, according to the brokerage house.
Despite pandemic and high base, the company has guided 10-15 percent growth based on strong order book position (albeit some expected delays).
ICICI Direct feels despite a significant run up, there is still scope for upside as the company is still trading at significant discount to some leading players in the space dealing with innovators.
"We emphasise on the strong execution capability and focused approach without the burden of success/failure of the innovative pipeline," the brokerage said.
Suven Pharma has reported a 28.1 percent sequential increase in Q4FY20 consolidated profit at Rs 74.18 crore YoY driven by share of profit from associates and lower tax cose. Revenue during the quarter rose 3.4 percent to Rs 184.76 crore YoY.
In FY20, company registered a massive 190.1 percent increase in profit at Rs 317 crore and 120.7 percent rise in revenue at Rs 833.79 crore compared to previous year, but these numbers are not comparable as company has become resultant entity from October 2018 after demerger.
Suven Pharma is focused on the business of contract development and manufacturing operations (CDMO).
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.WEBINAR: Tune in to find out how term insurance can provide risk protection during tough times. Register Now!
