Piramal Pharma likely to hit fresh highs as CDMO recovery lifts EBITDA, says Quest CIO

Piramal Pharma Ltd could be setting up for a sharper earnings rebound after a difficult year, with Quest Investment Managers betting that a recovery in its contract development and manufacturing operations (CDMO) will help the stock move back toward its earlier peaks. The investment case, according to Quest CIO and portfolio manager Rakesh Vyas, rests on a fading destocking drag, a healthier growth trajectory in the core CDMO business and the potential for operating leverage to lift profitability meaningfully over the next few quarters. The pharma stock ended 3.64% lower at Rs 218.35 in the current session. Market cap of the firm fell to Rs 29,069.99 crore. 

Destocking pain may be largely behind

Vyas said the company’s weak phase needs to be viewed in the context of an unusually strong FY25, when a key product supplied to a large pharma client boosted performance. That tailwind reversed in FY26 as inventory correction set in, hurting both revenue and earnings.

“Last year effectively has been challenging for this company,” Vyas said, adding that destocking of one major product weighed on the numbers after a strong prior year. In his view, however, “large part of it was in base already” by the end of the last fiscal, suggesting the worst of the reset may now be over.

CDMO engine remains the core trigger

The more important signal for investors is that the underlying CDMO franchise, excluding the volatility around that specific molecule, continues to expand at a healthy clip. Vyas pegged that growth at 15-20%, indicating that the core business remains intact despite the temporary earnings disruption.

That matters because Piramal Pharma has been one of Quest’s preferred ways to play the broader CDMO opportunity in pharma, a segment the fund house has remained constructive on even as it has stayed cautious on parts of the US generics space. In the wider interview, Vyas reiterated that globally diversified manufacturing platforms with scalable CDMO capabilities remain attractive within healthcare.

Why EBITDA could rebound faster

The real upside, according to Quest, may come from margin expansion rather than just topline normalization. With the company now operating off a lower base, even a return to a stronger growth path could translate into disproportionately higher profit growth.

“There is a lot of operating leverage that exists in this business which will drive meaningfully higher EBITDA growth,” Vyas said. He added that EBITDA recovery is “more likely to see from this year and meaningfully higher number next year,” strengthening the case for a rerating in the stock.

Stock outlook: Can past highs return?

That is the crux of the bull case. While Piramal Pharma remains below its previous peak despite a better run in the last two quarters, Quest believes improving earnings visibility could narrow that gap. “There is a scope for this stock to actually reclaim its earlier highs, and that’s what we are also betting on here,” Vyas said.

For investors, the message is clear: if CDMO growth sustains and EBITDA recovery plays out as expected, Piramal Pharma’s recent rally may prove to be more than just a short-term earnings trade.