Buy Hikal; target of Rs 340: ICICI Direct

ICICI Direct's research report on Hikal

Hikal is predominantly a B2B player that provides intermediates and active ingredients to global pharmaceutical, animal health, crop protection and specialty chemical companies. • Pharma and crop protection are 58% and 42% of operating revenues, respectively. The pharma business is currently divided in 50:50 ratio of APIs and CDMO. Animal health business accounts for 20-25% of CDMO business • In crop protection, 69% revenues are derived from CDMO while remaining is from proprietary products, specialty chemicals & specialty biocides • One of the largest suppliers of Gabapentin API (CNS) and in crop protection, one of the largest suppliers of Thiabendazole (TBZ).

Outlook

We maintain BUY despite near term headwinds as we continue to believe in the company’s execution prowess, visibility capex and the management’s expectation of gradual business normalisation in both segments. Valued at Rs 340 i.e. 18x P/E on FY24E EPS of Rs 19.

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