Buy Emcure Ltd for the Target Rs 2,300 by Motilal Oswal Financial Services Ltd
Growth momentum stable; execution shines
* Emcure Pharma (Emcure) delivered a better-than-expected financial performance in 1QFY27, with 6%/7%/21% beat on revenue/EBITDA/PAT. The performance surprise was driven by better-than-expected revenue across the focus segments and lower interest and tax rates.
* The growth momentum continued in Europe business in 1QFY27, driven by robust base business execution and increased off-take of new launches. The currency tailwind further fueled YoY growth in this segment.
* Canada business has been on a healthy growth path through market share gains and healthy off-take.
* Zuventus performance has returned to normalcy under new leadership and the reorganization of the team in the domestic formulation (DF) segment. Emcure continued to increase the contribution from chronic to drive sustainable growth going forward.
* We raise our earnings estimates by 7%/2% for FY27/FY28, factoring in
a) robust ARV order book addition in ROW markets
b) steady scale-up of business in EU segment
c) enhanced efforts driving better growth in DF. We value Emcure at 28x 12-month forward earnings to arrive at a TP of INR2,300.
* Emcure has scaled up its business during FY25-26 after two years of weak financial performance, backed by enhanced execution and acquisition. With niche products in the portfolio and efficient commercial channel network across focus markets of DF, EU, Canada and ROW, we expect 15%/21%/25% CAGR in revenue/EBITDA/PAT over FY26-28. Reiterate BUY
Operating leverage offsets the impact of adverse product mix
* 1QFY27 revenue grew 22.8% YoY to INR25.8b (est. INR24.3b).
* Gross margin (GM) contracted 340bp YoY to 58.4%.
* EBITDA margin expanded 50bp YoY to 19.7% (est. 19.5%); employee expenses/other expenses down 290bp/100bp YoY as % of sales.
* R&D expenses stood at INR904m (3.5% of revenue).
* EBITDA grew 25.8% YoY to INR5.1b (est. INR4.7b).
* Exceptional items of INR245m included a net gain of INR230m on forex transaction and INR15m related to changes in fair value of contingent consideration.
* Adj. for exceptional items, PAT came in at INR2.9b, up 34% YoY.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
