Concord Biotech's niche strengths seen buoying earnings: Analysts
Concord Biotech's strong foothold in the niche segment of manufacturing active pharmaceutical ingredients through fermentation along with its capacity expansion and planned launches are seen underpinning strong earnings growth for the company over the next three to five years, analysts said.
They see Concord Biotech's shares gaining 15-30% from the current levels as earnings per share are expected to see a compounded annual growth of about 27% over the next three years.
Shares of the Ahmedabad-based biopharma company, which listed a few weeks ago at a more than 20% premium, have notched another 9% gain since then. The shares topped ₹1,000 in intraday trade on Friday, before closing nearly 2% higher on the NSE at ₹983.40.
«Founded by a technocrat, Concord's focus lies on niche, high-value molecules across immunosuppressants, anti-infectives and oncology, wherein complex fermentation processes and difficulties in scaling up are key entry barriers,» said Kotak Institutional Equities.
Pegging the company as «the fermentation expert», the brokerage has an 'add' rating for its shares for a target price of ₹ 1,110.
While Concord is trading at a premium valuation compared with most of its listed peers, it also has superior profitability, and this is seen improving further.
«Compared to most Indian API companies, which operate in the 15-30% EBITDA margin range, Concord's EBITDA margins have slipped below 40% only once in the past decade,» Kotak said.
Antique Stock Broking sees the margins improving to 45%, aided by the company improving its market share in its top-five products and new launches. It has a 'buy' rating and target price of ₹1,340.
The brokerage is positive on the company's long-term contracts with its clients and
