Goldman Sachs has expanded its presence into the Indian CRO/CDMO (contract research organization/contract development and manufacturing organization) space as supply diversification increases in the global pharmaceutical industry. In the note, analysts initiated coverage on three stocks, with two buys and one sell.
TAM’s pharmaceutical R&D outsourcing volume, currently $200 billion, is growing at double digits annually, and Goldman expects India’s share to increase by 30 basis points in small molecule CDMOs by the end of FY28 and by 70 basis points for CRO. This increase could be threefold in a bullish scenario where China+1 trends accelerate faster.
Goldman analysts expect India’s share growth to be driven by three factors: capacity additions, improved capabilities and customer acquisition.
Talking about growth expectations for the industry, the analysts added: “We expect operating profit to grow 22% in FY24-27, driven by 13% revenue growth, taking into account the benefits of operating leverage, resulting in our EPS estimates of 26-27F. FY27 will be 4-10% above consensus.” . While the sector is trading at a premium valuation (+1SD over its 5-year average), we argue that higher multiples are warranted given such a strong earnings outlook.”
The firm began covering three stocks:
1. Singen
Syngene (SYNN) is a leader in the CRO space and its CDMO business may also see a turnaround, resulting in a Buy rating for the company and a price target of INR 875.
2. Neuland
Neuland (NEUL) stock has also been given a Buy rating with a target price of INR 9,100. The firm sees 46% growth potential for Neuland as it is a fast-growing CDMO with a “higher proportion of commercialized molecules.”
3. Laurel
Finally, Goldman put Laurus (LAUL) on sale with a price target of INR 350 due to earnings concerns due to monetization delays and high valuations.