Buy Akums Drugs and Pharmaceuticals; target of Rs 710: ICICI Securities

ICICI Securities's research report on Akums Drugs and Pharmaceuticals

Akums Drugs and Pharmaceuticals (Akums) in Q3FY25 saw its CDMO business’ volumes recovering (+0.6% YoY). Growth in CDMO should pick up in the next few quarters given Akums’ healthy order book alongside API prices also settling. EBITDA margins leaped 160bps to 12% as the company curbs losses (down 34% YoY/24% QoQ) in its API business; margins in CDMO were steady at 15.4%. Akums signed an EUR 200mn contract for the supply of oral liquid formulation to a customer in Europe – it shall receive EUR 100mn upfront and the rest based on supplies from CY27–32. We estimate FY24–27 revenue/EBITDA/PAT CAGRs of 15.8%/22.4%/32.0%. Upgrade to BUY; unchanged TP of INR 710, valuing the stock at 25x FY27E earnings.

Outlook

At CMP, the stock trades at 24.2x/17.8x FY26/FY27E EPS of INR 23.1/INR 31.5, respectively. We upgrade to BUY (earlier Add) with an unchanged target price of INR 710, valuing the company at 25x FY27E earnings.