Akums Drugs and Pharmaceuticals Share Price Hits Lower Circuit, Slips Below Listing Day

Akums Drugs & Pharmaceuticals: Recent Share Price Movement

The share price of Akums Drugs and Pharmaceuticals Ltd. has faced a challenging period on the bourses. On Thursday, November 14, shares were locked in a 5% lower circuit, marking the second such drop in the last four days. Over the past ten trading sessions, the stock has shed 35% of its value, slipping below its listing day low of Rs 725 and closing lower in 10 of the past 11 sessions. This substantial drop has raised concerns among investors about the company’s short-term stability.

Financial Performance: YoY Rise in Profits Amid Declining Revenue

Akums, a leading contract development and manufacturing organization (CDMO) based in Delhi reported a mixed performance for its recent financial quarter. The company posted a 16% year-on-year (YoY) increase in adjusted net profit, reaching Rs 66.7 crore. However, its revenue saw an 11.9% YoY decline, falling to Rs 1,046.6 crore. The primary reasons cited for this revenue drop include declining active pharmaceutical ingredient (API) prices and inconsistent demand. Despite profit growth, lower revenue has contributed to investor unease, influencing recent share price movements.

Operating Margins Under Pressure

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for Akums stood at Rs 134.7 crore, marking a 28% drop from the previous quarter. This resulted in an adjusted EBITDA margin of 12.9%, reflecting pressure on the company’s operating profitability. A contraction in margins has affected investor sentiment, adding to the downward pressure on Akums’ share price.

CDMO Business Dominates Revenue Mix

A significant 78% of Akums’ revenue comes from its core CDMO operations, positioning it as a key player in the contract manufacturing space within India. Despite challenges, the company maintains the largest manufacturing capacity in the country, with a current capacity utilization rate of 40%, leaving room for growth up to 60%. Although exports contribute around 5% of total revenue, Akums is also expanding its efforts in marketing to diversify its revenue streams and drive growth across other segments.

Challenges and Outlook: Navigating a Declining Share Price

The stock’s performance this month has been notably disappointing, with Akums’ share price declining over 30% in November alone. Market sentiment appears to be heavily influenced by the revenue and margin declines, compounded by lower API prices and fluctuating demand. Investors will be keen to see if the company can stabilize its performance in the coming quarters, especially with its sizable capacity and focus on broadening its revenue base.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.