Goldman Sachs (GS) has recently initiated buy ratings on two companies in the custom research and manufacturing services sector, while also recommending a sell on another.
The investment bank has initiated a buy rating on Syngene with a target price of ₹875. Despite short-term macro challenges in CY24, GS sees multiple catalysts for the company, including the improving biotech funding environment, the ramp-up of the Mangalore API/Stelis biologics plant in H2FY25/FY26, and new contract wins, especially in the current anti-China environment. GS forecasts India’s global market share to increase in both small molecule CDMO and CRO by FY28E in the base case.
GS has also initiated a buy rating on Neuland with a target price of ₹9100. The company is expected to face challenges to FY25 growth due to a high base, but GS sees multiple catalysts for Neuland, including the improving biotech funding environment, the new capacity at unit-3 coming online from FY25-end, and the commercialization of a large molecule in FY26/27.
On the other hand, GS has initiated a sell rating on Laurus Labs with a target price of ₹350. The investment bank believes that the risk-reward is unfavorable for the company due to the lack of catalysts for its CDMO business in CY24, a mismatch in timelines for new capacity monetization versus expectations, and slower growth in FY25 with risks on margin guidance versus expensive valuations.
In other news, Nomura has issued a buy call on Lupin with a target price of ₹1,949. The management’s comments suggest that the company will consolidate its presence across markets through improved execution and cost control, while also being conservative on inorganic expansion. Nomura forecasts an improvement in EBITDA margin and low capex to improve free cash generation over the next two years.
Additionally, GS has initiated a buy rating on CreditAccess Grameen with a target price of ₹1,788. The company has demonstrated a good track record through the cycles, and Nomura forecasts a healthy profit CAGR on strong lending and continued superior profitability.
Overall, the custom research and manufacturing services sector seems to be attracting attention from investment banks, with GS initiating buy ratings on Syngene and Neuland, while also recommending a sell on Laurus Labs. Investors will be keeping a close eye on these companies as they navigate the challenges and opportunities in the market.
