Buy Suven Pharmaceuticals, target price Rs 627: Anand Rathi

Anand Rathi has buy call on Suven Pharmaceuticals with a target price of Rs 627. The current market price of Pharmaceuticals is Rs 516.7. Time period given by analyst is one year when Suven Pharmaceuticals Ltd. price can reach defined target.

Suven Pharmaceuticals Ltd., incorporated in the year 2018, is a Small Cap company (having a market cap of Rs 13147.01 Crore) operating in Pharmaceuticals sector.

Suven Pharmaceuticals Ltd. key Products/Revenue Segments include Pharmaceuticals, Sale of services, Duty Drawback and Export Incentives for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 380.72 Crore, down -16.56 % from last quarter Total Income of Rs 456.27 Crore and up 45.06 % from last year same quarter Total Income of Rs 262.46 Crore. Company reported net profit after tax of Rs 91.67 Crore in latest quarter.

Investment Rationale
Suven’s pharma CDMO sales (down 21% q/q to Rs2bn) were less than expected as the contribution from one Covid molecule wasn’t as huge as expected. Specialty CDMO clocked sales of a good Rs1.3bn (up 30% q/q); formulation sales were Rs184m (up 28% q/q). The gross margin was steady at 69-70%. Staff costs and other expenses were higher (more transportation and distribution costs) at respectively 8.6% (avg. 6-6.5%) and 17.4% of sales (vs. avg. 14-15%). This translated to a 43% EBITDA margin. The higher tax rate (43% vs avg. 25-33%) eroded profit, which was Rs917m (42% y/y, adj. for the share of profit from rising pharma). The brokerage slightly trims earnings estimate, factoring in higher formulations sales (boosted from Casper’s site) which would drag on margins. It retains Buy rating, with a lower TP of Rs.627 (earlier Rs.660).

Promoter/FII Holdings
Promoters held 60.0 per cent stake in the company as of 31-Mar-2022, while FIIs owned 8.56 per cent, DIIs 6.56 per cent.