Buy Supriya Lifescience; target of Rs 410: KR Choksey

KR Choksey's research report on Supriya Lifescience

SLL’s products are well recognised by the major pharmaceutical players across the globe. It enjoys well-established presence in the API market by catering to diverse therapeutic segments. SLL has been a R&D driven company and its continuous focus towards enhancement and expanding its R&D facility has played a key role in establishing its position. SLL’s core strength lies in early identification of molecules going off patent in its existing therapeutic segments keeping in mind its existing chemistry and production infrastructure and ability to develop the product and scale-up the production. It mainly focuses on products which are high on value and low on competition which helps it derive relatively higher returns. At present it manufactures and supplies 38 APIs that finds application in therapies like antihistamine, analgesic, anaesthetic, vitamin, antiasthmatic and anti-allergic etc. It has consistently been the largest exporter of few products namely Chlorpheniramine Maleate and Ketamine Hydrochloride from India, contributing to 45-50% and 60-65%, respectively, of the API exports from India, between Fiscal 2017 and 2022. It was also amongst the largest exporter of Salbutamol Sulphate in terms of volume from India in Fiscal 2021. SLL’s top 10 customers account for 47% of revenue as on FY22. It’s products are exported to 86 countries including both regulated as well as semi/non regulated markets The products are registered with various international regulatory authorities such as USFDA, EDQM, NMPA (previously known as SFDA), KFDA, PMDA, TGA and Taiwan FDA.

Outlook

We initiate coverage on stock with “BUY” rating as all the above mentioned factors provides good growth opportunities and recommend a target price of INR 410/share, applying PE multiple of 16.5x on FY24E EPS, indicating upside potential of 16.80% from CMP.

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