Company Overview
Emcure Pharma Ltd. is an Indian pharmaceutical company engaged in developing, manufacturing, and marketing a broad range of pharmaceutical products across several major therapeutic areas globally. The company is an R&D-driven company with a differentiated product portfolio that includes orals, injectables and biotherapeutics, enabling it to reach a range of target markets across 70 countries, with a strong presence in India, Europe and Canada. The company has experienced rapid growth in sales in India in recent years, contributing 48.2% of sales from the domestic market, and the rest came from overseas markets in FY24. The company’s competitive advantage in the domestic market stems from a differentiated product portfolio, allowing it to establish a presence in most major therapeutic areas, including gynecology, cardiovascular, VMN, HIV antivirals, bloodrelated and oncology/anti-neoplastic. The company has strong capabilities and a proven brandbuilding track record, with six brands ranked among the 300 highest-selling brands in the IPM w.r.t. domestic sales for MAT FY24. The company has also established an international presence by either developing its front-end distribution capabilities or focusing on alliances with local companies and MNCs with an established presence in the therapeutic areas of focus. The company’s core strength lies in its ability to research, develop and manufacture in-house specialty pharmaceutical products for high-growth therapeutic areas, for which there is limited competition and high barriers to entry. The company has 13 manufacturing facilities across India, which 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.
Objects of the issue:
The net proceeds from the fresh issue will be used towards the following purposes:
- Repayment/Prepayment of certain outstanding borrowings;
- General corporate purposes.
Investment Rationale:
Long-standing market presence helps to leverage position in the domestic market
The company has a strong foothold in the domestic market, focusing on Indian domestic branded generics since 1995. It has shown successful growth in several key therapeutic areas and has outperformed the IPM in domestic sales between MAT FY20 and MAT FY24. The company’s relationships with global innovators have supported growth, allowing it to bring new technologies and products to the Indian market. The company has also established a strong position in therapeutic areas such as gynecology, cardiovascular, blood-related, pain and analgesics, and oncology/antineoplastics, driven by a unique product portfolio and early product launches. Separate management teams predominantly handle acute and chronic therapeutic area businesses, employing personalized strategies based on the differing needs of each area. The company’s strong marketing and distribution capabilities further solidify its leading position in the Indian pharmaceutical market, enhancing long-term growth prospects for the domestic business.
Fast-growing product portfolio to enhance visibility in international markets
Emcure Pharma has established a presence in international markets, which is believed to be a strong complement to domestic business and provide growth opportunities. The company employs a calibrated and differentiated approach to entering and deepening its presence in each market to address its unique characteristics, such as its regulatory landscape, market size, competitive landscape, and product scope. This allows them to strategically select local partners, acquire local companies or rights of pharmaceutical products, and establish subsidiaries with their own on-the-ground sales force in these markets. The company sells a portfolio of products internationally in over 70 countries, with Europe and Canada currently being the primary international markets. Its product portfolio in international markets comprises a mix of specialty branded generics, injectables and generic products. They also sell in-house products like iron, chiral, biotherapeutics, injectables, and photochemistry products, most of which are developed and manufactured by the company.
This diverse product range and global presence create a resilient business model with multiple revenue streams, leveraging their manufacturing and R&D capabilities. Emcure Pharma has a successful track record of entering new markets through strategic expansions, allowing it to utilize its R&D and manufacturing strengths in India while efficiently establishing distribution channels in Canada and Europe. Their focus in international markets is on developing and commercializing unique products with less competition, allowing for higher margins. Their growth strategies have deepened their presence in existing markets and enabled profitable expansion into new markets.
Valuation
Emcure Pharma Ltd. is a significant player in the pharmaceutical industry, having niche products for key therapies and a global market presence. The company is well-positioned to capitalize on its market position and expand rapidly. Emcure plans to enter the domestic market, particularly in rural areas, with its key brands in established therapies while continuing to develop unique products to meet patient needs. They have also increased their sales force over the last two years to expand their geographical presence. The company will also focus on expanding its international presence by increasing the sales force or establishing partnerships through unique products with less competition, leading to higher margins. The company’s revenue has grown at a compounded annual growth rate (CAGR) of 7% between FY2022-24. However, the topline has been increasing gradually, and there has been a dip in profitability mainly due to high finance costs. The company anticipates a substantial improvement in its bottom line as it plans to repay its borrowings with the proceeds. Emcure’s financial performance is driven by leveraging its leadership position in key therapeutic areas, established presence in international markets, proven track record in building brands, higher entry barriers, focus on R&D and strong manufacturing capabilities. The issue is valued at a P/E of 36.6x on the upper price band based on FY24 earnings, which is deemed fair. Therefore, we recommend a SUBSCRIBE rating for the issue.
