OneSource Specialty Pharma: ICICI Securities Reaffirms BUY Rating, Sets INR 2,475 Target on Strong FY28 Outlook

ICICI Securities has released a research report on OneSource Specialty Pharma, maintaining a BUY recommendation and setting a target price of INR 2,475. The report highlights a potential delay of approximately one quarter in the launch timeline for generic semaglutide approvals from the Canadian regulator. Despite this, OneSource's management expresses confidence in the upcoming opportunity, supported by secured approvals in India and expected approvals in Brazil and Saudi Arabia. Consequently, the company is maintaining its FY28 guidance for its base business.

OneSource Specialty Pharma has a diversified customer base, with over 20 customers who have already pre-booked its GLP-1 manufacturing capacity. Due to this strong pre-booking, the company is currently not onboarding any new customers. The management's ambitious goal is to achieve USD 500 million in revenue by FY28, which includes revenue from the proposed acquisition of injectable assets, alongside an EBITDA margin of approximately 40%.

To reflect the delay in revenue recognition from the semaglutide launches, analysts have cut the estimated Earnings Per Share (EPS) for FY26 and FY27 by approximately 48% and 5%, respectively. Looking ahead, the outlook suggests OneSource is poised for significant growth, with expectations of a Compound Annual Growth Rate (CAGR) of around 36% for revenue, 44% for EBITDA, and a substantial 356% for Profit After Tax (PAT) between FY25 and FY27. The EBITDA margin is projected to expand significantly, jumping by 652 basis points to 38.8% in FY28.

At its current market price (CMP), the stock is trading at 27.3 times its estimated FY27 EPS of INR 64.3 and 18.8 times its estimated FY28 EPS of INR 93.5. The BUY recommendation and target price of INR 2,475, based on a Sum-of-the-Parts (SoTP) valuation, indicate a positive outlook from ICICI Securities.

Impact

Rating: 7/10
This research report significantly impacts investors tracking OneSource Specialty Pharma. The reiterated BUY rating and target price suggest potential upside, while the acknowledgment of regulatory delays and EPS adjustments highlights inherent risks. Investors will be closely watching the company's progress in securing approvals and meeting its ambitious revenue and margin targets. For the broader Indian stock market, the impact is minimal, confined to stakeholders of this specific company or the specialty pharmaceuticals sector.

Difficult Terms

• Generic semaglutide: This refers to versions of the drug semaglutide that are not protected by a patent and can be manufactured and sold by other companies at a lower cost. Semaglutide is typically used for managing type 2 diabetes and weight loss.
• GLP-1 capacity: This refers to the manufacturing infrastructure and capability to produce drugs that mimic the action of Glucagon-Like Peptide-1 (GLP-1). GLP-1 is a hormone that helps regulate blood sugar and appetite.
• EBITDA margin: This is a profitability ratio that measures how much profit a company makes from its core business operations before accounting for interest, taxes, depreciation, and amortization. A higher EBITDA margin generally indicates better operational efficiency.
• FY28 guidance: This refers to the financial projections and targets provided by the company for the fiscal year ending in March 2028.
• EPS: Earnings Per Share. This is a company's net profit divided by the number of its outstanding shares. It is a key indicator of a company's profitability on a per-share basis.
• CAGR: Compound Annual Growth Rate. This is a measure of the average annual growth rate of an investment over a specified period longer than one year.
• SoTP basis: Sum-of-the-Parts valuation. This is a method used to value a company by estimating the value of each of its business segments or assets separately and then adding them together to arrive at the total company value.
• CMP: Current Market Price. This is the price at which a security is currently trading in the market.