(Because even agrochemicals can’t protect your margins from USFDA love letters)
1. At a Glance
Hikal Ltd — a 35-year-old chemicals-pharma hybrid — just took a 7.24% market hit after Q1 FY26 numbers showed a ₹22 Cr loss thanks to a USFDA “OAI” (Official Action Indicated) status on a key pharma plant. Market cap: ₹3,330 Cr, P/E: 52.6 (yes, still premium-priced despite the loss), ROE: 7.41%, ROCE: 9.87%. They operate in pharma APIs, crop protection actives, and specialty chemicals, with R&D muscle in Pune and manufacturing across Maharashtra, Karnataka, and Gujarat.
2. Introduction
Imagine a company that straddles two very different worlds — regulated pharma and farm chemicals — and occasionally gets whiplash when one side of the business sneezes. Hikal has long-term partnerships with multinationals, a pipeline of 13–14 CDMO products, and ambitions in new segments like battery chemicals and personal care actives.
But here’s the catch: while they can boast a 23% OPM a decade ago, FY25 margins are closer to 16% — and Q1 FY26 OPM crashed to 7%. Add flat sales growth over five years (just 4.29% CAGR), and you get a business that’s more cyclical than consistent.
3. Business Model (WTF Do They Even Do?)
Segments:
- Pharma APIs & Intermediates – Generics and custom manufacturing for global pharma.
- CDMO – Contract Development & Manufacturing, with 2 new product launches expected by FY26.
- Crop Protection – Active ingredients, intermediates, custom synthesis for agrochemicals.
- Specialty Chemicals & Research – Personal care actives, battery chemicals, home care ingredients.
Revenue mix shifts depending on regulatory wins/losses and crop seasons. The CDMO pipeline is the “growth hope,” but pharma regulatory hurdles can hit revenue overnight — as Q1 FY26 proved.
4. Financials Overview
TTM Revenue: ₹1,833 Cr
TTM PAT: ₹63 Cr
EPS (TTM): ₹5.12
P/E: 52.6
ROE: 7.41%
5-Year Sales CAGR: 4%
5-Year PAT CAGR: -1%
Q1 FY26 shocker:
- Revenue: ₹380 Cr (-6.5% YoY)
- PAT: -₹22 Cr vs ₹7 Cr YoY
- OPM: 7% vs 13% YoY
Margins have yo-yo’d for years: 18–20% in good years, 13–15% in weaker ones.
5. Valuation (Fair Value RANGE only)
P/E Method
- EPS: ₹5.12
- Sector median P/E: 32.2
- FV Range (P/E 25–35)
