Piramal Enterprises rating – Buy: Ready to take over, pharma faces challenges


In its lending business, with most of the DHFL branches now reactivated, we expect disbursements from HL to pick up speed. However, in the pharmaceuticals sector, we expect the difficulties to persist in CDMO, which will lead to sales realization below potential. We expect complex injectables to see a recovery in sales and consumer healthcare to maintain its growth momentum. We are raising our FY22-24e consol PAT estimates by 1 to 3% taking into account a slightly higher PBTDA FS and a slightly lower pharmaceutical Ebitda. Maintain Buy.

DHCP integration on track, HL payments to be accelerated: We expect housing loan disbursements to improve in the fourth quarter, although a more significant acceleration is likely after the fourth quarter of FY22 as disbursements from DHFL branches gain momentum. We believe Piramal is well positioned as there are no major HFCs with pan-Indian presence in its target segment (Rs 1.6 min ATS, Independent Borrowers in Tier 2-3 locations). Execution remains the key, however.

T4FY22 Preview: We expect the consolidated PAT (pre-minority) to increase by 9% QoQ to reach 7.7 billion rupees. In the lending sector, we expect lending to fall 2% QoQ as the wholesale book continues to unwind, albeit at a slower pace. We expect FS PPOP to decline by 4% due to lower loan portfolio; we expect FS PBTDA to decline 18% YoY (38% YoY) due to higher provisioning QoQ. In Pharmaceuticals, we expect EBITDA to rise 5% YoY (66% YoY). We remain attentive to feedback on (a) progress in ramping up and hiring branches; (b) recoveries/recoveries from a pool of derecognized bad debts.

Maintain purchase: We are increasing our FY22-25E consol PAT by 1-3% taking into account a 2-4% increase in our FY22-25e FS PBTDA estimates partially offset by a 2-3.5% reduction in our FY22- estimates 25th pharma Ebitda. We are rescheduling our PT to March 24 (December 23 earlier). Our PT remains unchanged at Rs 3,100. Our SOTP-based PT values ​​Lending activity at 1.4x BV/1.5x ABV (Mar 24e) and Pharma Core at 18x ​​Mar 24E EV/Ebitda .

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