Goldman Sachs has expanded its coverage to the India CRO/CDMO (contract research organization/contract development and manufacturing organization) space as supply diversification in the global pharmaceutical industry picks up. In a note, analysts initiated coverage on three stocks – two Buys and one Sell.
The Pharma R&D outsourcing TAM, currently $200 billion, is seeing double-digit annual growth, noted analysts, and Goldman expects India’s share to increase 30 basis points in small molecule CDMO and 70 bps for CROs by the end of FY28. These gains could be three-fold in a bull-case scenario where China+1 trends accelerate faster.
Analysts at Goldman expect growth in India’s share to come from three Cs: Capacities coming online, Capabilities improving and Customer traction.
On their expectations for growth in the space, analysts added,“We expect 22% OP growth over FY24-27E, driven by 13% topline growth while factoring operating leverage benefits, putting our FY26-27E EPS estimates 4%-10% above consensus. While the sector is trading at premium valuations (+1SD vs. its 5Y average), we argue that higher multiples are warranted given this strong earnings outlook.”
The three stocks the firm has initiated coverage on are:
1. Syngene
Syngene (SYNN) enjoys a leading position in the CRO space and its CDMO business is also set to inflect, leading to a Buy rating at the firm and a price target of INR 875.
2. Neuland
Neuland stock (NEUL) has also been given a Buy rating with a price target of INR 9,100. The firm sees 46% upside potential for Neuland as it’s a fast-growing CDMO with a “higher share coming from commercialized molecules.”
3. Laurus
Finally, Goldman has launched Laurus (LAUL) at Sell with a price target of INR 350 owing to earnings challenges from monetization delays, and premium valuations.