Buy Suven Pharmaceuticals; target of Rs 400: ICICI Direct

ICICI Direct's research report on Suven Pharmaceuticals

Q2 revenues declined 13% YoY to Rs 237.4 crore mainly due to higher base of one-time pharma contract in Q2FY20. Pharma segment de-grew 30.3% YoY to Rs 144 crore. Specialty chemicals grew 25.6% YoY to Rs 68 crore. EBITDA margins contracted 446 bps to 41.5% amid higher employee cost and other expenditure. EBITDA declined 21.5% to Rs 98.5 crore. PAT declined 20.4% YoY to Rs 74.1 crore. Delta vis-à-vis EBITDA was mainly due to higher depreciation, lower other income partially offset by lower tax rate.

Outlook

We continue to emphasise on the strong execution capability and focused approach without the burden of success/failure of the innovative pipeline. We upgrade from HOLD to BUY rating with a target price of Rs 400 based on 20x on FY23E EPS of Rs 20.