Synopsis:
JPMorgan has issued Buy recommendations for Divi’s Laboratories and Cohance Lifesciences, forecasting a potential upside of 28 percent and 42 percent respectively, and citing the vibrant growth opportunity of the Indian CRDMO market, expected to reach $15.4 billion by 2029 with a CAGR of 13 percent.
JP Morgan has picked two of its best bets in the CRDMO segment, which presents a huge growth opportunity for the next 5 years. In this article, we will dive more into the details of what led to such bullishness in this industry.
Analyst Comment
Global brokerage firm JPMorgan has assigned a Buy call on Divis Laboratories with a target price of Rs 7,800, signalling an upside of 28 percent from its previous day’s closing price of Rs 6,112 per share.
Additionally, it also assigned a Buy call on Cohance Lifesciences with a target price of Rs 1,300, signalling an upside of 42 percent from its previous day closing price of Rs 912.70 per share.
According to JPMorgan, the Indian CRDMO (Contract Research, Development, and Manufacturing Organisation) market is projected to gain a 13 percent CAGR and will be $15.4 billion (Rs 1.35 lakh crore) by 2029, up from $8.2 billion (Rs 72,160 crore) in 2024.
The brokerage observed that the Indian CRDMOs have the advantage of being the beneficiaries of the structural growth drivers, along with the capacity and capabilities investments.
The growth will likely be supported by strong request-for-quotation (RFQ) momentum, major capex plans (approximately 30 percent of gross block), and relative protection from the risks of tariffs. JPMorgan forecasts 17 percent revenue CAGR for the sector from FY25 to FY28 and earnings CAGR of 20 percent over the same period.
Compared to others, Divi’s Labs in the sector has been known for its organically built scale, strong process chemistry expertise, and a successful track record for execution. On the other hand, Cohance Lifesciences has been widening its horizons by making the ADC (antibody-drug conjugate) target market almost seven times larger, that is $1.8 billion, through acquisitions.
While global brokerage JPMorgan’s recommendations highlight strong growth potential for Divi’s Laboratories and Cohance Lifesciences, investors should consider their individual risk tolerance and perform their own due diligence before making investment decisions.
Though the Indian CRDMO sector offers promising opportunities, but market dynamics, regulatory changes, and company-specific factors can influence outcomes, making a balanced and informed approach essential.
Written by Satyajeet Mukherjee
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