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Phase-1 of pCAM to commission by April’27

Sudeep Pharma reported consolidated revenue of INR1.6bn in Q1FY27, up 27% YoY but down 13% QoQ. The Specialty Ingredients (SI) segment reported revenue growth of 19% YoY but declined 46% QoQ, primarily due to subdued demand across certain NSS and disruption in LPG supply during the quarter. The SI business contributed 32% of total revenue during the quarter, while EBIT margin contracted sharply by 1,190bps YoY and QoQ. The Pharmaceutical, Food & Nutrition (PFN) segment delivered a healthy performance, with revenue increasing 31% YoY and 20% QoQ. The company's pCAM project remains on track for Phase 1 commissioning by April’27, with two additional strategic MoUs signed during the quarter and planning for capacity beyond 100ktpa to 200ktpa is already underway.

We expect the company to deliver Revenue/EBITDA/PAT CAGRs of 13%/11%/11% over FY26–FY28E. We have assigned an option value of INR243/share to its battery-grade iron phosphate business, reflecting the long-term potential of this emerging vertical. At the current market price, the stock trades at 48x FY28E EPS, which we believe is premium valuation given the near-term earnings outlook. While the upcoming greenfield expansion provides a meaningful long-term growth opportunity, the bulk of the earnings contribution is expected only from FY29 onwards. FY28 is likely to be a transition year, with the new capacity operating at less than ~30% utilization during the ramp-up phase. Accordingly, we maintain our 'REDUCE' rating with a revised target price of INR855, valuing the company at 45x FY28 EPS.

Revenue increased 27%YoY/-13%QoQ:

Consolidated revenue stood at INR1.6bn (+27.0% YoY / -13.2% QoQ; PLe: INR1.8bn), 11% below our estimate. The sequential decline was due to geopolitical uncertainties, intermittent gas supply constraints, elevated logistics costs, and continued container shortages across key trade routes. Gross margin stood at 64.2%, compared with 66.1% in Q1FY26 and 65.0% in Q4FY26. Absolute gross profit was INR1.0bn, up 23.0% YoY but down 14.0% QoQ.

Specialty EBIT margin contract by 1190bps YoY & QoQ:

The Specialty Ingredients segment EBIT margin contracted 1,190bps YoY and QoQ to 21.8%, compared with 33.5% in both Q1FY26 and Q4FY26. In contrast, the Pharma & Food Nutrition segment reported EBIT margin expansion of 630bps YoY and 490bps QoQ. The Pharma segment accounted for 68% of total revenue during the quarter.

EBITDA decreased by 12% sequentially:

EBITDA came in at Rs549mn (25% YoY/-12% QoQ), and EBITDA margin came at 34.7% (vs35.1% in Q1FY26 and 34.3% in Q4FY26), PAT stood at Rs406mn (29.8% YoY / -16.4% QoQ), while PAT margin at 26% (vs. 25% in Q1FY26 and 27% in Q4FY26).

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