Piramal Life Sciences has target of Rs 270: Kohli

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Daljeet Singh Kohli See what other Experts & Brokerages are saying about Study Abroad See messages about Study Abroad Piramal Life BSE | NSE 09/02/12 Are Mutual Funds betting on Piramal Life?

Daljeet Singh Kohli , Head of Research at Emkay Global Financial Services is of the view that Piramal Life Sciences has target of Rs 270.

Kohli told CNBC-TV18, "Piramal Life Sciences is carved out of divisions of Research and Development (R&D) from Piramal Healthcare a few months back; they have listed this company separately. This company focuses on therapeutic areas like diabetics, anti-infective, oncology and inflammation. This company has very strong R&D pipeline of 15 molecules out of which seven of them they are in Phase I or Phase II stages, which means there is a greater visibility of success for this company. We expect that another one molecule could be added probably by FY09."

He further added, "It has de-risked its model to an extent that besides doing its own invented in-house research it also has an in licensing deal with three of the top innovator companies of the world like Eli Lily, Merck. So what basically we are expecting here is that from Eli Lily probably first installment of fee would come off around Rs 5 million by FY09 and when it reaches a Phase I stage of innovation."

"If you see the infrastructure for R&D it has a 2 lakh square feet the R&D facility here in Goregaon in Mumbai, which is housed with 309 scientists. This infrastructure if you were to built today in India you will probably need around Rs 2 billion whereas the current enterprise value of this company is around Rs 4 billion. So on that replacement cost basis it is again attractive."
 
"The fourth major reason on the valuations would be that the only other listed company in this sector is Sun Pharma Advanced Research Company (SPARC). In that comparison this company again is available at around 80% discount to their marketcap whereas this has much stronger pipeline of R&D, much better equipped with scientists and facility. Our price target as of now - for a risk adjusted DCF-based price target is Rs 270."
 
Disclosure: Analyst doesn't hold the above stock but has recommended to the clients.