Pharma firm Concord Biotech's shares scaled eight percent in trade on May 29, after Kotak Institutional Equities upgraded the stock to 'add' as the brokerage sees further scope for margins to expand.
"Primed with its proficiency in the high entry barrier fermentation API segment, strong client connects and robust execution track record, Concord is in a sweet spot," said Kotak.
The firm focuses on niche, high-value molecules across immunosuppressants, anti-infectives and oncology, wherein complex fermentation processes and difficulties in scaling up are key entry barriers.
Kotak raised its target price on Concord Biotech to Rs 1,550 per share, implying an upside of 11 percent from the previous session's close.
At 10.55 am, shares of the firm were quoting at Rs 1,491.1 apiece on the NSE, higher by 6.8 percent.
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Concord delivered a healthy performance in the quarter ended March, with revenue, EBITDA and PAT being in line with Kotak's estimates. After an impressive 220 bps EBITDA margin expansion in FY2024, Concord is guiding for further improvement in FY2025 and FY2026E.
The brokerage said that it expects the firm to report a 28 percent EPS CAGR over FY2024-27. This will be led by robust underlying demand trends, market share growth in existing molecules, which is driven by recent capacity expansions after a few years of capacity constraints and new launches.
Concord Biotech is backed by the late Rakesh Jhunjhunwala's family, who hold a 24 percent stake in the company.
Shares of the company made their debut on the bourses in August last year and since then, have delivered around 53 percent returns. The stock had listed on the exchanges at a premium of 21 percent to its issue price on August 18, 2023.
A block deal involving 37 lakh shares, translating to a 3.4 percent stake in Concord Biotech changed hands in a block deal on May 28. The transaction, valued at Rs 519 crore, was done at a floor price of Rs 1,401 apiece.
CNBC-TV18 reported on May 27, citing sources, that one of the company's shareholder, Ontario Inc was looking to offload shares worth Rs 468.40 crore.
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