On the cusp of recovery…
About the stock: Piramal Pharma Limited (PPL) is part of the Piramal group of companies. The company operates in 3 major segments.
• Contract development and manufacturing organisations (CDMO)
• Complex hospital generics (critical care)
• Piramal Consumer Healthcare (PCH).
PPL owns 17 development and manufacturing facilities across India, US and UK with capabilities in sterile, API, formulations, drug discovery and manufacturing of nutrition products. The company holds 49% stake in AbbVie Therapeutics, JV with Allergan, and 33.33% in Yapan Bio which operates in the biologics / bio-therapeutics and vaccine segments.
Result Performance & Investment Rationale:
• Q4FY26 – Excluding destocking performance Inline- Revenues for Q4FY26 stood flat YoY to ₹2,752 crore as 4% decline in CDMO business (61% of sales) to ₹1708 crore was offset by growth in other segments. The Complex Hospital Generics segment (27% of sales) grew 7% YoY to ₹755 crore, while the India Consumer Business (11% of sales) grew ~17% to ₹320 crore. Gross profit margin (GPM) for the quarter stood at 61.6% (down 369 bps); whereas EBITDA de-grew ~18% YoY to ~₹460.5 crore, with the EBITDA margin declining by 363 bps to 16.7%, mainly due to Gross margin compression. During the quarter, the company recognized an impairment loss of ₹176 crore on intangible assets under development resulting Net loss of ₹ 8.8 crore for the.
• Normalisation expected from FY27- Overall performance was largely in line with expectations. The CDMO business was impacted by de-stocking; adjusting for this, the segment delivered healthy double-digit revenue growth in Q4. Improving biopharma funding is also translating into stronger RFP momentum and a pickup in order inflows for the CDMO segment. Management is also focusing on Cost Optimization & Operational Excellence which should help improve profitability of the segment going forward. The CHG business was affected by the postponement of certain institutional orders in H1 but has since begun to recover. The recent Kenalog acquisition should further support growth in this segment, alongside traction in ex-US inhalation anaesthesia. Growth in the India consumer business continues to be driven by power brands and e- commerce. The management has guided for early to mid-teen revenue growth with accelerated growth in EBITDA and PAT. Strong pipeline of 157 molecules (25 in phase III) and capex continuity besides management’s confidence of achieving of long-term guidance (CDMO revenue target of US$ 1.2 billion by FY30) provides ample growth visibility.
Rating and Target price
Our SoTP value is ₹ 220 based on 16x FY28E CDMO EBITDA, 14x FY28E CHG EBITDA, 2x FY28E PCH Sales, and 10x PAT from AbbVie JV.
