Add Anthem Biosciences Ltd For Target Rs. 798 By JM Financial Services
Moderate 2Q; near-term weakness induces ADD rating
Anthem Biosciences delivered a moderate 2QFY26 with rev./EBITDA/PAT growing 5%/12%/ 7% and EBITDA margins expanding 432bps YoY to 41.5%. Growth was driven by the CRDMO segment (+8.5% YoY) supported by commercial molecule ramp-up (56% of rev.), and resilient CRO traction despite funding challenges in biotech. Specialty Ingredients (-13% YoY) declined due to capacity prioritization but is expected to recover in 2HFY26 with Unit II expansion now complete. Unit II’s final 76kL block is now operational, while Unit III fermentation capacity will commission by year-end, adding INR 6bn in revenue visibility. With nine potential blockbusters, marquee clients such as AbbVie, Novartis, and Pfizer, and six commercial programs whose endmarket sales are expected to double by CY29, Anthem’s growth visibility remains strong. We forecast FY25–28 revenue/EBITDA/PAT CAGR of 22%/22%/24%, supported by INR 13–14bn of internally funded capex. While Anthem is projected to be amongst the fastest growing CRDMO over FY25-28, near-term earnings moderation and elevated valuations limit upside. We value the stock at 40x Sep’27E EBITDA, at par with Divi’s, to arrive at a TP of INR 798. Maintain ADD.
* CRDMO & Specialty ingredients: CRDMO (86% of sales) reported INR 4.8bn in sales (+8.5% YoY). In 1HFY26, 56.4% of overall revenue was contributed by commercial molecules. The CRO contribution 9.8% of total sales in 1HFY26. The company continues to witness reasonable traction in the CRO project pipeline through the funding winter. Specialty Ingredients (14% of sales) INR 781mn in sales (-13.1% YoY). The capacities are fungible b/w CRDMO and Specialty ingredients, with Specialty ingredients being used to utilize spare capacity during expansion phase. YoY drop is on account of focus on CRDMO. With the Unit II expansion now complete, the segment is expected to grow in 2HFY26.
* Peptide and GLP-1: The company has 10 non-GLP1 novel peptide programmes in early stages. While GLP-1 is the immediate opportunity, Anthem will benefit from the rising prominence of peptide as a fast growing modality. In GLP-1, Anthem is working both with innovators as well as generic players and is confident of supplying in India as the market gets formed next year. Anthem has the advantage of backward integration over other players. In generic GLP-1, most players are relying for fermentation fragment on China, but Anthem will have in-house supply and hence more control over material cost. Further, Anthem is also in conversation to be onboarded as a secondary supplier for an in-market biosimilar, with transition to primary supplier over time
* Expansion plans: On 5th Nov’26, Anthem inaugurated and commenced commercial operations at its final block of 76 kL custom synthesis capacity at Unit II, thus completing the Unit II expansion. The company spent INR 1.8bn in Unit II expansion, assuming 1.6x-1.7x gross block turnover (in-line with the entity), the revenue potential will be ~INR 3bn as per management. At Unit III (Harohalli), all blocks except fermentation block are now operational, with the latter being expected to commission by end of the year. Unit III has specialty blocks, hence contribution should be substantial post commissioning, though the unit won’t be profitable at year end. Unit III will have gross block of INR 4-4.5bn (INR 3.5bn already incurred), and with the target 1.4-1.5x gross asset turnover, should result in INR ~6bn revenue potential in long-term. Unit IV expansion is progressing as planned and should be commercialised in the next 2 years. The company has laid out INR 10bn capital towards adding 400kL CS and 100kL fermentation capacity in this unit.
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SEBI Registration Number is INM000010361
