Emcure Pharmaceuticals Ltd. (Apply for Listing Gains)

Highlights

Emcure Pharmaceuticals Limited (EPL) incorporated in 1981, is an Indian pharmaceutical company engaged in developing, manufacturing and globally marketing a broad range of pharmaceutical products across several major therapeutic areas.

They are a research and development (R&D) driven company with a differentiated product portfolio that includes orals, injectables and biotherapeutics, which has enabled them to reach a range of target markets across over 70 countries, with a strong 218 presence in India, Europe and Canada. In India, they are present across acute and chronic therapeutic areas, and their key therapeutic areas include gynecology, cardiovascular, vitamins, minerals and nutrients, human immunodeficiency virus antivirals, blood-related and oncology/anti-neoplastics.

They were ranked as (i) the 13^th largest pharmaceutical company in India in terms of Domestic Sales for MAT FY24, (ii) the 4^th largest pharmaceutical company by market share in their covered markets in terms of domestic Sales for MAT FY24, and (iii) the largest pharmaceutical company in the gynecology and human immunodeficiency virus (HIV) antivirals therapeutic areas in India in terms of Domestic Sales for MAT FY24.

EPL has 13 manufacturing facilities across India. Their facilities are capable of producing pharmaceutical and biopharmaceutical products across a wide range of dosage forms, including oral solids, oral liquids, injectables, including liposomal and lyophilized injectables, biotherapeutics and complex APIs, including chiral molecules, iron molecules and cytotoxic products. Out of the total proceeds of Rs. 19,520 mn, Rs. 6,000 mn would go towards repayment and/or prepayment of all or a portion of certain outstanding borrowings availed by the company the and accrued interest thereon, Rs. 2,000 mn would go towards general corporate purpose and Rs. 11,520 mn would go towards existing selling shareholders of the company.

Key Highlights

• The global pharmaceutical market is expected to grow at a CGAR of ~5.0 pct to 5.5 pct between the CY23 and CY28, to reach approximately USD 1,900 bn to USD 1,950 bn CY28. The Indian domestic formulations segment (consumption) is expected to grow at a CAGR of approximately ~8 pct to 9 pct between the FY24-FY29, to reach approximately Rs. 2.9 trillion to Rs. 3.0 trillion in FY29. EPL is well position to capitalize such growing opportunity.
• EPL has a strong focus in the women’s healthcare market. They are a market leader in the gynecology therapeutic area in the IPM, where they ranked 1^st and have a 13.53 pct market share, in terms of Domestic Sales for MAT FY24, and their market share was 1.70x the market share of their next largest competitor in this therapeutic area in the IPM.
• They sell their portfolio of products internationally in over 70 countries, with Europe and Canada currently being their primary international markets. Their sales outside India contributed to 51.72 pct of sales for FY24. Their range of products and geographic presence provides them with a risk-minimizing business model that derives considerable resilience through different revenue streams, as well as leverages their manufacturing and R&D capabilities.
• EPL’s key strategy includes (i) to increase their market share in the domestic market. (ii) continue to invest in research & development and manufacturing capabilities to enhance and grow their differentiated product portfolio. (iii) deepen and expand their international presence with a focused go-to-market approach. (iv) pursue strategic acquisitions, partnerships and in-licensing arrangements.
• On March 13, 2024, EML entered into agreements with Sanofi India Limited and Sanofi Healthcare India Private Limited to exclusively distribute 228 and promote their products, which include brands such as Cardace, Clexane, Targocid, Lasix, Lasilactone, Cordarone, Plavix and Synvisc, in India.
• EPL has filed over 1,800 dossiers globally for products offered through differentiated product platforms including 209 in the European Union and 142 in Canada. The company had been granted 220 patents and had 30 pending patent applications in several countries and had submitted 102 drug master files (DMFs) for APIs with the USFDA.
• Sales of the company has grown by ~6.64 pct CAGR during the period FY22-24. During FY24, company reported sales of Rs. 66,583 mn which increased by ~11.23 pct YoY, while EBITDA increased by 4.57 pct YoY to Rs. 12,768 mn as EBITDA margin fell from 20.24 pct in FY23 to 19.01 pct in FY24. As of FY24 the company reported profit of Rs. 5,276 mn which was down by 6.08 pct YoY.

Key Risk

• The company is subject to risks arising from exchange rate fluctuations, which could adversely affect their business as half of the sales of the company comes from outside India.
• If third parties on whom EPL rely for clinical trials do not perform their obligations as contractually required or as they expect, and do not comply with current Good Manufacturing Practices (“cGMP”) or other applicable regulations, EPL may not be able to obtain regulatory approval for or commercialize their products.

Financial Performance and KPI’s

Peer Comparison based of FY24

Valuation

EML has differentiated product portfolio that includes orals, injectables and biotherapeutics, which has enabled them to reach a range of target markets across over 70 countries. The company is planning to reduce its debts which will reduce finance cost and boost profit of the company. At the upper end of the price band of Rs. 1,008 the issue is priced at a PE of 36.07x of FY24 earnings. The issue looks fully priced. However, one can subscribed for listing gains.

Also read: Evolving Landscape of Financial Advisory in India

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