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ICICI Securities
Piramal Enterprises (Buy)
Target: ₹2,278
CMP: ₹1744.50
Piramal Enterprises’ (PEL) wholly owned pharma subsidiary Piramal Pharma Ltd (PPL) has announced the acquisition of Hemmo Pharma for an upfront cash consideration of ₹775 crore and additional milestone linked payments.
PPL believes that Hemmo’s forte in peptide API manufacturing will not only complement the existing contract development and manufacturing organisation (CDMO) business but also provide additional growth opportunity as well as provide vertical integration led benefits. In our assumption, the deal is valued at 7 times of FY21 sales and 20 times of FY21 EV/EBITDA.
We expect Hemmo to grow its revenue at a CAGR of 30 per cent over FY21-FY23. We remain positive on PPL’s unique positioning in the pharma business with its CDMO services and critical care products.
We expect PPL’s revenue to CAGR at 15.2 per cent over FY21-FY23 led by 16.7 per cent CAGR in CDMO, 13 per cent CAGR in CHG and 12.5 per cent CAGR in OTC business. Operating leverage would aid margin growth at 29.5 per cent during the same period. Margins would gradually expand to nearly 25 per cent by FY23.
We maintain Buy with a revised target price of ₹2,278/share (earlier: ₹2,265).