ICICI Securities raised its target price for Akums Drugs to Rs 850 following strong Q1 FY27 results, where profit grew to Rs 101 crore. While the CDMO business remains a key growth driver, investors should also track emerging risks, including margin pressure in the domestic segment and ongoing tax litigation.
ICICI Securities has maintained its 'Buy' rating on Akums Drugs and Pharmaceuticals, increasing its target price to Rs 850 from Rs 680. This revision follows the company’s first-quarter performance for the fiscal year 2027, which saw consolidated revenue grow by 13.9% year-on-year to Rs 1,167 crore.
The pharmaceutical company reported a profit after tax of Rs 101 crore for the quarter, a significant increase from Rs 65 crore in the same period last year. A major factor behind this performance was the company's Contract Development and Manufacturing Organization (CDMO) segment, which recorded an 18.6% growth in revenue. The brokerage noted that improvements in cost management contributed to EBITDA margins expanding to 15.0%, up from 12.6% a year ago.
Strategic expansion remains a focal point for the company. Akums recently announced the acquisition of Oriflame India’s manufacturing business for Rs 56 crore. This move is intended to strengthen the company’s presence in the cosmetics and wellness product categories. Looking toward international growth, Akums is preparing for new shipments to Zambia, valued at USD 25 million, expected to begin in the third quarter of FY27, alongside planned expansion into the European market.
Despite the positive outlook on growth, investors should be aware of several operational and financial challenges. While the CDMO business is growing, the rate of this growth has shown signs of deceleration compared to previous quarters. Additionally, the company is facing margin compression in its domestic branded formulations business, where margins declined by 449 basis points. The API (Active Pharmaceutical Ingredient) segment continues to report losses and revenue decline, partly due to price volatility in the market.
Furthermore, the company is dealing with regulatory and legal uncertainties. Akums has disclosed a contingent liability involving an income tax assessment order of Rs 156 crore, which is currently under appeal. While the company maintains a strong net cash position and reports zero debt, the outcome of this tax litigation remains a key monitorable.
The future performance of the stock will likely depend on the company's ability to maintain its CDMO growth momentum while managing profitability in its struggling segments. Investors may keep a close watch on the progress of the upcoming international shipments, the integration of the recently acquired Oriflame business, and any updates regarding the pending tax litigation.