Piramal Enterprises Stock Hits 52-Week High After Analysts Hike Targets

Shares of Piramal Enterprises Ltd. jumped to their 52-week high as analysts raised price targets on the pharma-to-real estate conglomerate after its third-quarter results.

The company’s net profit rose 10% year-on-year to Rs 799.4 crore in the three months ended December, according to an exchange filing. That compares with the Rs 533.3-crore consensus estimate of analysts tracked by Bloomberg.

• Its revenue fell 3% to Rs 3,168.6 crore, against the Rs 3,784.5-crore forecast.
• Revenue from the company’s contract development and manufacturing organisation and India consumer products business grew 16% and 14%, respectively, over the year earlier.

The acquisition of Dewan Housing Finance Corp., Piramal said, is in line with its strategy to diversify loan book and increase granularity. The move, according to the filing, was another step towards the demerger of the financial services and pharma business in the future.

That may have prompted analysts to also maintain their bullish investment recommendation for Piramal Enterprises as they termed the DHFL deal to be “value accretive”. They, however, await final regulatory approvals before incorporating it in their estimates.

Shares of Piramal Enterprises gained as much as 6.8% as of 10:15 a.m on Friday to Rs 1,744 apiece—the highest since December 2019. The stock is up for the third straight day.

Here’s what the analysts have to say:

Citi

• Maintains ‘buy‘ rating and hikes price target to Rs 1,890 apiece from Rs 1,730.
• Focus will shift to new retail segments and DHFL deal, which may take time till June to consummate.
• Large provision buffer; rise in sales for developers.
• Implied FY22 price-to-book of financial services is attractive in the context of an improved outlook for developer loans and a well-cushioned balance sheet.

Motilal Oswal

• Maintains ‘buy‘ rating; hikes price target to Rs 2,170 apiece from Rs 1,960.
• Expects the company to remain cautious in wholesale lending with incremental disbursements to be largely driven by retail.
• Forecasts 12% loan book CAGR over FY21-23.
• Provision buffer of 6.3% of the total loans is largely adequate.
• Growth outlook for the pharma business is improving.
• Raises EV/Ebitda multiple for the pharma business to 16x from 14x earlier factoring a strong order book in the CDMO/CHG segment.

ICICI Securities

• Maintains ‘buy‘ rating and raises price target to Rs 2,059 from Rs 2,029.
• Business transformation is in the offing.
• Disbursements too have started kicking in under the company’s new retail lending strategy, coupled with rollout of new products and partnerships.
• Demerger of financial services and pharma business, business transformation in each of these segments are near- to medium-term triggers.
• Expects pharma segment revenue CAGR of 6.3% over FY20-23.
• Key Risks: Litigation by other contenders on DHFL‘s bidding outcome can differ the process and higher mark-down on acquired portfolio.