Buy Suven Pharmaceuticals; target of Rs 530: ICICI Direct

ICICI Direct's research report on Suven Pharmaceuticals

Dedicated CRAMs supports the global life sciences industry and fine chemical majors in their NCE development endeavours. Its services include custom synthesis, process R&D, scale up and contract manufacturing. In Q2FY23, CRAMs pharma vertical contributed 39% of sales. Besides pharma CRAMs, Suven has also developed and supplied intermediates/technical for specialty chemicals CRAMs, which accounted for 54% of sales. Generic formulations accounted for 7% of sales • Suven is currently on a three pronged investment plan, 1) relocating R&D centre, 2) replacement and upgradation of blocks at Suryapet facility and 3) additional new block in line with FDA regulations at Pashamylaram facility.

Outlook

We upgrade from HOLD to BUY as recent correction in the stock provides reasonable upside in the backdrop of a revival in pharma CRAMs inquiries and stable outlook for specialty chemicals CRAMs. Valued at Rs 530 i.e. 30x P/E on FY24E EPS of Rs 17.7.