Buy Supriya Lifescience; target of Rs 1030: Choice Equity Broking

Choice Equity Broking's report on Supriya Lifescience

SUPRIYA has built a durable and defensible margin moat, consistently delivering 30–35% EBITDA, well above Indian API peers (mid-20s). This structural edge is driven by two entrenched strengths: Deep backward integration: ~18 integrated products contribute 81% of Q1FY26 revenue, buffering the business from input volatility and ensuring stable realizations. Dominance in niche therapies: Leadership in anesthetics and anti-anxiety APIs—markets with limited domestic competition support premium pricing power. Margins are expected to temporarily soften to ~33% in FY26E due to Ambernath scale-up costs. However, we believe EBITDA margin is positioned to normalise at ~35% by FY28E, sustaining structural leadership.

Outlook

We forecast Revenue/EBITDA/PAT CAGR of 21.6%/18.9%/19.4% over FY25–28E, driven by operating leverage and a richer mix of complex, higher-value products. With contracted revenue visibility, we value the business using DCF method (click here to view). With a TP of INR 1,030 and a 38.6% upside, we initiate our coverage with a BUY rating on the stock. This results in an implied PE of 29x, broadly in line with peers with a PEG ratio of 1.5x.