Emcure Pharmaceuticals shares jump 10%; Kotak upgrades stock to 'Buy'

Emcure Pharmaceuticals Ltd shares surged 9.91 per cent in Tuesday's trade to hit a day high of Rs 1,440.90. The stock was last seen trading 6.19 per cent up at Rs 1,392.15. At this price, it has climbed just 2.45 per cent on a year-to-date (YTD) basis.

Today's upward move in the share price came after Kotak Institutional Equities upgraded Emcure Pharma to 'Buy' from 'Add' with an unchanged fair value of Rs 1,680, suggesting a potential upside of 20.68 per cent as against a value of Rs 1,392.15.

"After a decent H1 FY25 print, we expect a further pick-up in Emcure's organic growth in H2 FY25, with upbeat prospects across India, Canada and ROW (rest of the world). Compared to 6 per cent year-on-year (YoY) in H1 FY25, we estimate 9 per cent YoY overall organic growth in H2 FY25E. Led by healthy organic growth, an in-licensing deal with Sanofi, consolidation of Mantra and with most of the legal challenges behind, we expect Emcure to report a 13 per cent overall sales CAGR over FY2024-27E. On a low base, we expect improved productivity post the 20 per cent+ field force addition since FY2022 and higher utilisation of the new facilities to drive robust 18 per cent/29 per cent EBITDA/EPS CAGRs, over FY2024-27E," the domestic brokerage stated.

"Considering the business model is characterised by healthy growth, robust EBITDA margins, low working capital requirements and low capex, we expect return ratios to remain strong and forecast 20-21 per cent RoAEs, over FY2025-27E," Kotak added.

"Led by its R&D prowess, Emcure has built a complex portfolio (40 per cent of sales), comprising chiral molecules, iron compounds and biologics. It is a leading player in gynaecology and has also scaled up brands across multiple therapies, such as cardiac, VMN, anti-infectives and antivirals, leading to one of the highest prescription coverages (71 per cent) among specialists in the IPM," it also said.

"Emcure is one of the few major Indian pharma players, with no meaningful direct US generics exposure, thereby lending greater earnings stability. Post the recent correction (stock has corrected around 15 per cent from its peak), we upgrade Emcure to 'Buy' with FV of Rs 1,680," Kotak further stated.

With that being said, the brokerage pointed out that further repercussions due to the drug price-fixing cases in the US/Canada, further litigations such as the now-resolved one with HDT Biocorp and inability to consistently outperform IPM growth are key risks to Emcure's growth.

As of September 2024, promoters held a 78.08 per cent stake in the company.