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Leading manufacturer of fermentation based APIs: Concord Biotech (CBL) is one of the leading global manufacturers of select fermentationbased APIs (F-APIs) across immunosuppressants and oncology with market share of >20% by volume in 2022. It is present across the fermentation value chain, and supplies to >70 countries including regulated markets, such as US, Europe and Japan, and India. As of FY23, CBL had 23 APIs (~89% of revenue), which it aims to increase further especially in anti-infective/oncology segments.

Strengthening presence in Formulations too: In 2016, CBL launched its formulation business in India (11% of sales) as well as emerging markets (Nepal, Mexico, Indonesia, Thailand, Ecuador, Kenya, Singapore & Paraguay) and have further expanded to US. In India, it has built a portfolio of 27 brands across immunosuppressants, nephrology and antiinfective drugs for critical care.

F-API global market holds huge potential: Concord has an established presence across therapeutic areas and is well-poised to benefit from the industry growth tailwinds. According to F&S Report, global oncology/ immunosuppressant/ anti-infective API markets are expected to grow at CAGR of 14%/10%/3% over CY22-26. CBL has a portfolio of >200 customers spread over 70 countries as of FY23 which it plans to expand further along with increasing the wallet share with existing clients to tap this opportunity

Financials: CBL recorded 18% CAGR in revenue over FY21-23 with robust EBITDA margin of 40%. Its return ratios are healthy with RoE/RoCE of 20%/19% and it generated free cash flow over last two years with FCF/EBITDA at 29%.

Issue Size: ?15.5bn IPO consists of only OFS of 20.9mn shares by investor Helix Investment which would mark its complete exit. The market cap post listing would stand at ?77.5bn.

View: We like CBL given its complex product portfolio, presence in niche space, strong client relationship and high entry barriers. The issue is valued at 32x P/E in line with peer group’s avg: ~32x. We believe CBL could benefit from the industry tailwinds given its PLI approval in place. Hence we recommend Subscribe.

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