Shares in Hikal — a provider of life sciences value chain solutions to pharma and chemical businesses — have lost 47 percent of their value in the past six months. More than half of that loss came in the last one month alone. Analysts say there is nothing wrong with the company fundamentally from a long-term perspective.
The Hikal stock has hit a series of 52-week lows in the past few sessions.
According to ICICI Direct, a recovery is likely in Hikal in the second half of the year ending March 2023 even as it sees headwinds to persist in the company's pharma and crop protection businesses, which account for 58 percent and 42 percent of its operating revenues respectively.
"We continue to believe in the company's execution prowess, visibility capex and the management's expectation of gradual business normalisation in both segments," the brokerage said in a research report dated June 6.
ICICI Direct believes the recent steep correction in Hikal shares continues to offer a decent risk-reward preposition. It has a 'buy' call on the stock with a target price of Rs 340 for the next 12-18 months, based on a PE ratio of 18 times March 2024 earnings per share (EPS).
At Wednesday's closing price, the target means a 20.8 percent upside in the stock.
ICICI Direct sees less-than-expected demand offtake and legal challenges persisting from the Surat incident as key risks for Hikal. It will continue to monitor developments on recent critical issues in the company:
A broader downtrend in the stock of the chemical intermediates maker's stock began in January following a chemical leak in Surat that claimed six lives and hospitalised 23. In February, the Maharashtra Pollution Control Board (MPCB) sent a notice for the closure of Hikal's Taloja plant over alleged non-compliance by the company in relation to the incident.
The unit contributed about Rs 260 crore to its revenue in the year ended March 2021.
BP Wealth expects Hikal to benefit from tailwinds in the form of new opportunities arising from global supply chain disruptions and China Plus One strategy for its pharma segment. It has maintained a 'hold' call on Hikal but brought down its target price for the stock by 30 percent to Rs 298.
"The industry faces strong headwinds due to the inflationary pressures and a sharp rise in input costs, energy and solvents; the management expects growth to be tapered and margins to contract in the year ending March 2023," according to BP Wealth.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
BJP is planning to ban RSS, says Shiv Sena (UBT) chief Uddhav Thackeray
May 18, 2024 8:01 PM
Punjab Lok Sabha elections: Complete list of Congress candidates
May 18, 2024 4:08 PM
Punjab Lok Sabha elections: Check full list of AAP candidates and constituencies
May 18, 2024 12:59 PM
PM Modi, Rahul Gandhi election rallies in Delhi today: Here are the routes to avoid
May 18, 2024 11:28 AM