Broker’s Call: Hikal Ltd (Buy)

Target: 366 rupees

CMP: INR 319.60

The company reported a significant increase in revenue to ₹ 2,023 crores and EBITDA to ₹ 257 crores, as compared to the previous year’s ₹ 1,943 crores and ₹ 341 crores, respectively, showcasing its ability to navigate challenging market conditions successfully. The growth is due to the implementation of several strategic initiatives, including cost management, supply chain optimization, procurement simplification, productivity improvement, product mix optimization, and automation.

In the last quarter, pharmaceutical sales remained flat, with total revenue at approximately Rs. 309 crore, almost unchanged from Rs. 308 crore in Q4FY22. The company’s focus on business excellence initiatives contributed to improving margins during the period. Further, the company has seen improved attraction from new and existing customers in the CDMO business, indicating a positive reception in the market. In addition, the construction of a new multi-purpose animal health plant at Bagnoli, Gujarat, is progressing as planned and is expected to be completed in the first half of FY24. This upcoming facility holds promising prospects for the company’s expansion and growth in the animal health sector.

Crop protection sales showed strong growth, increasing by 22 per cent to ₹236 crore (₹194 crore). This significant growth can be attributed to the company’s efforts in exploring new opportunities, with advanced discussions underway with several global innovators.

In general, the company’s financial performance, strategic initiatives and expansion plans are major factors that may affect its share price. We’re still ‘bullish’ on the company, evaluating it with a price target of $366 with a P/E of 16.5x using an expected EPS of $22 (FY ’25).