Shares of Kilpest India, one of the country's leading agri-based companies, have more than doubled investors' wealth in the last one year. During this period, the shares have scaled up from 365.40 to ₹823 apiece, translating into a stellar return of 125%.
Notably, in the current month so far, the stock has zoomed nearly 34%, and during Monday's trading session (September 11), it hit a new record high of ₹867. Looking at the long-term performance, the stock delivered a whopping return of nearly 12200% in the last 10 years, and during this period, the stock closed 6 years in green, with CY20 standing as the best-performing year with a multi-bagger return of 291%.
Going forward, the stock's positive trend is expected to continue, as per the projections made by domestic brokerage firm Nuvama Professional Clients Group, which highlights the strong potential in the company's molecular diagnostics business.
Kilpest India started with agrochemicals in 1972 and forayed into the niche molecular diagnostics business in FY10 through its subsidiary 3B Black Bio Biotech India. The molecular diagnostics business clocked 46% CAGR in the last five years (FY18–23) and contributed over 80% of revenue in FY23 from 33% in FY18.
The management intends to amalgamate 3B BlackBio Biotech with the parent and rechristen the company as 3B BlackBio Dx. It will now be classified as a diagnostic player instead of an agrochemical company, said Nuvama.
The molecular diagnostics business is a niche and emerging segment globally given the need for accurate and real-time PCR-based diagnosis, rapid test kits for infectious diseases, and genome sequencing, according to the brokerage.
Nuvama expects the company to sustain healthy growth in the molecular diagnostics business led by product launches, acquisition of new customers, and geographical expansion. KLPI has a strong network of dealerships, sticky customers, and a presence in 35 countries.
Well-placed to tap the growing molecular diagnostics market
The brokerage pointed out that Kilpest India, having firmly established itself in the domain of real-time PCR-based molecular diagnostic kits with the 'TRUPCR' brand (85–90% of molecular diagnostics revenue is from the non-COVID business), is now gearing up to broaden its portfolio to include rapid test kits (comprising 10–15% of segmental revenue) for infectious diseases and antimicrobial resistance (AMR) through the 'TRURAPID' brand.
It is also foraying into next-generation sequencing (NGS) under the ‘TRUNGS’ brand, which, according to brokerage, may be the biggest opportunity for the company in FY25.
The cash-rich position offers scope for inorganic initiatives
The cash-rich position offers scope for inorganic initiatives. As of March 31, the company is sitting on cash of ₹151 crore, including liquid investments. The brokerage expects a free cash flow (FCF) of ₹69 crore over the next three years. The company is actively scouting for inorganic opportunities to expand the molecular diagnostics business, which offers upside risk, it said.
Comfortable valuation
Despite the recent run-up, the stock is available at a discount of 51% to the average P/E ratio of two prominent diagnostic players (Dr. Lal PathLabs and Metropolis Healthcare), based on the average P/E ratio for FY25–26E.
A healthy balance sheet, a change in business classification, and healthy growth prospects in the molecular diagnostics business are key triggers for a re-rating in the stock, stated the brokerage.
In light of these factors, Nuvama recommends a 'buy' rating on the stock with a target price of ₹1,184. This target price implies an upside of 44% for the stock from its previous closing price of ₹823.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before making any investment decisions.
