Buy Shaily Engineering Plastics Ltd for the Target Rs 3,404 by Motilal Oswal Financial Services Ltd
Scaling complexity: Healthcare at the core Rich experience in making high-precision products for global brands
Shaily Engineering Plastics (SHEP) has nearly four decades of rich experience in manufacturing high-precision, innovative, and quality products. The company has a diversified business across various industries, such as healthcare, consumer, personal care, appliances, automotive, and lighting. It caters to global industry leaders such as IKEA, Unilever, Gillette, P&G, GE, and Garrett. It is also among select global players specializing in complex products such as IP-led insulin and GLP-1 pens.
Healthcare: On a strong footing to achieve multifold growth
SHEP’s Healthcare segment has made significant strides over the past year. The patent for semaglutide expired in Mar’26 in some of the major emerging markets, including India, Canada, and Brazil, paving the way for generic drugmakers to enter these markets. Notably, in most GLP-1 engagements, SHEP has been selected as the sole device supplier, underscoring the confidence of global majors in its capabilities. Given the vast opportunity, order book visibility, and customer expansion, SHEP plans to expand its pen manufacturing capacity fivefold to over 150m units by 4QFY28, with a total planned investment of over INR6b. This high-margin segment revenue is expected to be INR8.8b by FY28E at 50% CAGR over FY26-28E and account for >50% of revenue by FY28 (FY23: ~10%), supporting high EBITDA margin and robust cash flows.
Consumer electronics and semiconductors are optionality plays
SHEP is also exploring opportunities within the component value chain of the consumer electronics and semiconductor industries. While management has yet to share concrete details, we believe this foray could emerge as a significant growth driver for the company starting 2026, given the robust potential in these industries and SHEP’s focus on high-value, niche, and complex plastic components. An INR5b fundraising plan will help SHEP to encash any strategic growth opportunity coming its way.
Robust financial outlook driven by high-margin Healthcare segment
Robust financial outlook driven by high-margin Healthcare segment After clocking 26%/59%/82% YoY growth in revenue/EBITDA/PAT in FY26, its EBITDA margin expanded to 28.2% from 22.4% in FY25, aided by the Healthcare segment. We expect the growth momentum to sustain at 29%/38%/43% CAGR over FY26-28, with a 32%+ EBITDA margin in FY28, driven by volume commitments from key healthcare customers. A robust RoE/RoCE (~28%/36% in FY28E) and OCF (~INR8b over FY26-28) will support augmenting GLP-1 pen capacity by ~5x.
Valuation and view – Initiate coverage with a BUY
We initiate coverage on SHEP with a BUY rating and a TP of INR3,404 (26% upside potential), based on 45x FY28E P/E (~+1 SD of its 10-year mean). Strong earnings growth and cash flows, along with expansion in return ratios, will support such valuation, in our view. Key risk: SHEP’s stock price has risen over 50% in a year and ~5x/10x in the last 2/3 years on the back of its strong earnings growth. While we project robust earnings growth to sustain, any large miss could lead to a de-rating in the scrip’s valuation, in our view.
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