ICICI Direct is bullish on Hikal has recommended buy rating on the stock with a target price of Rs 190 in its research report dated October 12, 2018.
ICICI Direct's research report on Hikal
Established in 1988, Hikal is a B2B player that provides active ingredients, intermediates and R&D services to global pharmaceuticals, animal health, crop protection and specialty chemicals companies. For FY18, pharma and agrochem accounted for 58% and 42%, respectively, of operating revenues. The pharma business currently is divided almost equally between generic active pharma ingredients (APIs) and contract research & manufacturing (CRAMs) businesses. Animal health business accounts for 8-10% of overall pharma revenues. In agrochem, 70% of revenues are derived from CRAMs with remaining from proprietary products. Hikal owns five manufacturing facilities: Taloja, Mahad (Maharashtra), Panoli (Gujarat) Jigani (Karnataka) & an R&D centre at Pune.
With proven capabilities and management pedigree, we believe Hikal offers a compelling value proposition as it continues to expand both the pharma and agrochem segments with separate focus and a calibrated approach. This bodes well in the current scenario when Chinese supply disturbances are likely to create opportunities for Indian API and CRAMs players. At the CMP, the stock is currently trading at ~20x FY19E EPS of Rs 8.1 and 14.6x of FY20E EPS of Rs 11.0.
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