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Last Updated : Dec 02, 2019 11:06 AM IST | Source: Moneycontrol.com

Buy Suven Life Sciences with target Rs 387: AnandRathi

Considering the lower-than-anticipated R&D cost and operating expenses, we raise our FY20e and FY21e EBITDA respectively 16.7% and 22.8%.

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AnandRathi

In earnings and revenue, we expect respectively 13.6% and 38.5% CAGRs over FY19-21 driven by Suven’s core CRAMS and traction in commercial quantities. Suven’s core CRAMS business at 990m grew 38% y/y in Q2 FY20 and revenues from commercial quantities were 1.08bn.

Management raised its full-year commercial quantity sales guidance to 1.8bn. On the scaling-up of projects and supplies of molecules in phase-II and -III trials, its core CRAMS business, we believe, would clock a 12% revenue CAGR over FY19-21. At end- Q2 FY20, Suven had an active CRAMS pipeline of 117 projects: 78 in phase-I, 34 in phase-II, one (oncology) in phase-III and four commercial.

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In Q2 FY20 revenue from specialty chemicals was Rs 540m (Rs 50m a year back, Rs 1,053m the prior quarter). We believe revenue from the new molecule will counter the lower revenues from the old molecule. Thus, on the high base we expect only a 5% revenue CAGR over FY19-21.

Considering the lower-than-anticipated R&D cost and operating expenses, we raise our FY20e and FY21e EBITDA respectively 16.7% and 22.8%.

At the CMP of Rs 309, the stock trades at 26.7x and 23.6x respective FY20e and FY21e earnings. We expect revenue and PAT CAGRs over FY19- 21 of 13.6% and 38.5% respectively.

We retain our buy recommendation, based on 15x FY21e base-business earnings and a net value of 108 a share for the NCE pipeline.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Dec 2, 2019 11:05 am
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