Recommendation from Pharmaceuticals sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.[EasyDNNnews:PaidContentStart]

IOL Chemical and Pharmaceuticals Ltd : CAPITALISING ON API GROWTH & CHEMICAL EXPANSION

HERE IS WHY
✓ Market Leadership in APIs
✓ Strong Export & Regulatory Wins
✓ Solid Financial Flexibility

I ndia’s pharmaceutical and specialty chemicals sectors are poised for robust growth, driven by global supply chain shifts like China+1, government incentives, and increasing demand for sustainable solutions. The pharmaceutical market in India is valued at around $55 billion, while the specialty chemicals market is estimated to be worth $220-250 billion, with specialty chemicals making up approximately 18-20 per cent of the latter. IOL Chemicals and Pharmaceuticals Limited (IOLCPL) operates strategically within these sectors, with APIs, such as Ibuprofen, contributing 57 per cent of revenue, and specialty chemicals like Ethyl Acetate contributing 43 per cent.

IOLCPL’s focus on backward integration and a diversified product portfolio strengthens its competitive edge. The company holds a significant share in the global Ibuprofen market, leveraging its state-of-the-art manufacturing facilities and strong regulatory compliance. In FY25, IOLCPL’s revenue slightly declined by 2.7 per cent YoY to ₹2,087.55 crore, but it posted a strong EBITDA of ₹224.6 crore with a margin of 10.7 per cent, and Net Profit (PAT) of ₹101 crore.IOLCPL’s key growth drivers include a diversified API portfolio, focusing on reducing dependency on Ibuprofen and expanding non-Ibuprofen products like Metformin, Paracetamol, and Clopidogrel. The company targets a 50-50 split between Ibuprofen and non-Ibuprofen APIs, with non-Ibuprofen revenue projected to reach ₹800-900 crore.

Export expansion is another key driver, with regulatory approvals such as USFDA and China NMPA for Ibuprofen and REACH registration for Acetic Anhydride. Exports currently contribute 26.7 per cent of sales, and the company aims for 40 per cent export revenue in the next two years. IOLCPL’s focus on quality, compliance, and supply reliability supports this momentum.

The company’s backward integration ensures cost leadership, producing key raw materials like Iso Butyl Benzene and Acetyl Chloride in-house. Its 17 MW co-generation captive power plant reduces energy costs, improving margins and enhancing supply chain resilience.

IOLCPL is expanding its manufacturing capacity, with the Paracetamol plant targeting 60 per cent utilisation by Q3 FY26 (up from 34 per cent in Q1 FY26), and the Metformin plant operating at over 90 per cent utilisation. In R&D, IOLCPL spent ₹21.02 crore in FY25, developing eight new products, with a focus on complex APIs and sustainable solutions, including 95 per cent renewable energy by 2030.

In Q1 FY26, IOLCPL posted 9.8 per cent YoY growth in net sales, reaching ₹559.06 crore. The company achieved 19.5 per cent YoY growth in EBITDA, which rose to ₹69.51 crore, with a 12.4 per cent EBITDA margin. PAT also increased 14.4 per cent YoY to ₹33.93 crore.

The stock is trading at a P/E ratio of 32.2x, slightly below the industry average of 33.4x, making it attractive for long-term investors. With a low debt-to-equity ratio of 0.07x and strong liquidity, IOLCPL is financially flexible to support expansion and growth. Its promoter holding of 52.62 per cent further boosts investor confidence.

IOL Chemicals and Pharmaceuticals Ltd is well-positioned for long-term growth, with strong market leadership in APIs and chemicals, a diversified product portfolio, expanding exports, and attractive valuations. Its operational efficiencies and stable financial profile. We recommend a BUY.

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