Buy Akums Drugs and Pharmaceuticals; target of Rs 925: ICICI Securities

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • CDMO growth: Akums' CDMO revenue grew 38.6% YoY, driven by a 20% jump in volumes, surge in API prices, and mix improvement, with a strong order book and improving utilisation of newer facilities.
  • Margin expansion: The company's EBITDA margin expanded 522bps YoY to 14.5%, driven by product mix improvement and higher API prices.
  • New projects and capacity additions: Akums is adding a new manufacturing facility at Baddi, Himachal Pradesh, which will commence production in Q1FY28, and has received a purchase order from Zambia, with supplies expected to begin in Q4FY27.
  • International expansion: The company is expanding its presence in Africa, Southeast Asia, and Europe, with a growing product pipeline and plans to diversify into regulated markets.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for:

  • Sustained CDMO growth: Continued strong growth in CDMO revenue, driven by new orders and improving API prices.
  • Margin expansion: Further expansion in EBITDA margin, driven by product mix improvement and higher API prices.
  • Successful commissioning of new facilities: Timely commissioning of the Baddi facility and commencement of production.
  • Progress in international expansion: Successful expansion into new markets, including Africa, Southeast Asia, and Europe, and diversification into regulated markets.