Shilpa Medicare hits new high of Rs 922, up 4% on BSE

Shilpa Medicare (SML) has experienced a remarkable surge in its stock price, skyrocketing 179% so far in 2024. On September 16, the company's shares hit a new peak of ₹922, marking a 4% increase in intra-day trade on the BSE- Bombay Stock Exchange. This impressive performance comes as Antique Stock Broking initiates coverage with a 'Buy' rating and sets a target price of ₹1,300. The target price values the company at a 25x price-to-earnings (P/E) multiple based on half-year FY27 earnings per share, aligning with its decade-long average multiple.

Stock performance outshines the market

In the past month alone, Shilpa Medicare's stock has surged by 36%, significantly outperforming the broader market, where the BSE Sensex has risen just 3.3%. This robust performance in 2024 contrasts sharply with the 15% gain seen in the benchmark index, underscoring the stock's strong upward trajectory.

Company overview and strategic focus

Shilpa Medicare is a leading manufacturer of Active Pharmaceutical Ingredients (APIs) and offers a range of services, including formulation development. The company is known for its high-quality APIs, intermediates, and speciality chemicals, particularly in the oncology sector. SML's state-of-the-art technology ensures adherence to international standards, positioning it as a top global supplier of oncology and non-oncology APIs and intermediates.

In its FY24 annual report, SML highlighted its focus on expanding its formulation portfolio, especially in oncology, to meet the growing global demand for cancer treatment. The company anticipates continued growth from the commercialization of its APIs, with numerous products set to become generic between 2025 and 2028.

Government initiatives bolster sector growth

The Indian government's launching of the National Policy on Research and Development and Innovation in the Pharma-MedTech Sector, coupled with the Promotion of Research and Innovation in the Pharma-MedTech Sector (PRIP) scheme, has provided a significant boost. The introduction of production-linked incentives for 35 different APIs aims to reduce import dependency and enhance domestic manufacturing capabilities. 

Analysts’ outlook and prospects

Antique Stock Broking's analysts believe that Shilpa Medicare's growth trajectory is entering a new phase, driven by sustainable revenue from Finished Dosage Forms (FDF) and APIs, along with an expanding Contract Development and Manufacturing Organization (CDMO) business. The company's substantial capital expenditure in areas such as Novel Drug Delivery Systems (NDDS), biosimilars, and Recombinant Human Albumin (rHA) is expected to pay off. Analysts project a revenue growth compound annual growth rate (CAGR) of about 34% over the next two years, with an EBITDA margin of approximately 35% by FY27. Additionally, they anticipate an EPS CAGR of over 100% from a low base.

Key takeaways

• Shilpa Medicare's stock has surged 179% in 2024, hitting a new high of ₹922.
• Antique Stock Broking has rated the company's stock 'Buy' and set a target price of ₹1,300.
• Shilpa Medicare outperformed the market significantly in the past month and year.
• The company's strategic focus includes expanding its oncology portfolio and leveraging government incentives.
• Analysts predict strong future growth driven by substantial investments in new technologies and expanding business segments.

For those interested in share market investment and exploring opportunities in promising stocks, Shilpa Medicare presents an intriguing option.