Orchid Pharma shares hit 20% upper circuit as Investec initiates 'Buy' citing strong growth

Orchid Pharma shares zoomed on Friday, December 8, and hit the 20 per cent upper circuit on the BSE at Rs 678.4 apiece. The stock jumped after brokerage firm Investec initiated a 'buy' call on the counter, citing strong growth over the next three years as the new management (Dhanuka Group), as per the brokerage, continues to deliver.

At around 12:40 p.m., shares of the Chennai-based pharmaceutical company traded 15.95 per cent or Rs 90.15, higher on the BSE at Rs 655.5 apiece. The market capitalisation of the company stood at Rs 3,315 crore.

Investec is bullish on Orchid Pharma's new management led by Dhanuka Group, as, according to the report, the management continues to execute the turnaround strategy well and leverages the company's core strengths in Cephalosporin Active Pharmaceutical Ingredients (APIs).

According to the brokerage, the company's earnings before interest, tax, interest, depreciation, and amortisation (EBITDA) have doubled in the last three years. Further, the debt is also reduced.

Additionally, Investec believes that the company will benefit from a revival in API capacities and US business.

"Orchid Pharma's turnaround was led by management efforts towards cost control, top-line growth, and focus on CFs over the last three years. EBITDA has tripled, and there is no leverage. Management aims to transform the company into a fully integrated global Ceph company: PLI + API + Cefiderocol CDMO + Branded India + US Gx," the report read.

The brokerage estimates sales/EBITDA/PAT CAGR at 24 per cent/38 per cent/49 per cent in FY23–26E. Taking a bullish stance, Investec has initiated a 'buy' call on the stock with a target price of Rs 800 apiece, which implies an upside of 41.5 per cent above December 7's closing price of Rs 565.35 apiece.

Orchid Pharma share price: Historic performance 

Orchid Pharma shares have surged over 76 per cent against the Nifty 50's rise of over 14 per cent. 

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