Should You Invest In Lincoln Pharma

Lincoln Pharma stands out as a compelling investment opportunity, driven by its strong growth prospects, robust financial health, and undervalued valuation. The company’s strategic focus on product innovation, geographic expansion, and operational excellence positions it well for sustained growth. Despite its significant potential, Lincoln Pharma trades at an attractive valuation of just 12.8x PE, a rarity for high-growth companies, making it an opportune buy.

Valuation

Lincoln Pharma is trading at a PE multiple of just 12.8x, which is significantly lower than its peers in the pharmaceutical industry, especially for a company with such growth potential. The low valuation presents an attractive entry point for investors.

Investment Recommendation

With a strong liquidity position, supported by healthy cash accruals and strong return ratios. We recommend a BUY on Lincoln Pharma with a long-term horizon, driven by:

• Leveraging India’s Cost Advantage: India’s pharmaceutical industry benefits from lower production and labor costs compared to developed nations. This cost advantage likely extends to Lincoln Pharma, allowing it to offer competitive pricing in both domestic and international markets.
• A strong growth outlook supported by entry into regulated markets, which could serve as a major breakthrough for the company.
• The management’s confidence in achieving ₹1,000 crore in revenue within the next 3–4 years, is underpinned by a healthy margin profile.
• Cephalosporin Plant as a Key Growth Driver: The expansion of their Cephalosporin plant in Mehsana, Gujarat, is a major strategic initiative.
  • The plant is expected to contribute around Rs. 150 crore in sales over the next three years.
  • It will enable Lincoln Pharma to expand its product portfolio in the Cephalosporin category, which includes tablets, capsules, dry syrups, and injectables.
  • Initially focused on domestic markets, the company is working on registering Cephalosporin products for export to multiple countries.
• Strong R&D Focus: Lincoln Pharma emphasizes innovation through its research and development efforts. It has a team of over 75 R&D professionals, including 30 scientists, working in DSIR-approved R&D facilities. This indicates a commitment to developing new products and technologies.
• Patents as a Competitive Advantage: The company has been awarded 7 patents and has filed over 25 patent applications. Patents can provide a competitive edge by protecting intellectual property and creating barriers to entry for competitors.
• The company is committed to maintaining a net debt-free status, providing financial flexibility and strength for future investments and expansions.

With its well-defined strategy, robust financial position, and clear growth path, Lincoln Pharma is positioned as a standout performer in the pharmaceutical sector.

Key Growth Catalysts For Lincoln Pharma

1. Ambitious Revenue Targets with Profitability Retention:
   • The management has set a revenue target of ₹1,000 crore over the next 3–4 years, reflecting a CAGR of ~15%, while maintaining strong profitability and margin performance.
   • For FY26, the company has already guided revenue growth to ₹750 crore, up from ₹614.97 crore in FY24.
2. Expansion into Regulated Markets – A Game Changer:
   • Lincoln Pharma’s entry into regulated markets like Canada, the EU, and potentially the US, represents a transformative opportunity.
   • These markets typically offer higher margins, and regulatory approvals from Australia such as Therapeutic Goods Administration (TGA) and WHO-GMP further validate the company’s quality standards and global readiness.
3. Strong Product Pipeline and R&D Excellence:
   • The company boasts a portfolio of over 1,700 registered products, with 700 more in development. This robust pipeline ensures a steady stream of product launches across domestic and export markets.
   • Its focus on high-demand therapeutic areas such as lifestyle, chronic diseases, women’s healthcare, and dermatology aligns with long-term industry trends.
4. Geographic Diversification and Export Growth:
   • Exports contribute over 60% of total revenue, and the company plans to expand its export network from 60+ to 90+ countries.
   • The Cephalosporin plant expansion is expected to generate ₹150 crore in sales over the next three years, further bolstering the export segment.
5. Strong Financial Position:
   • Lincoln Pharma remains net debt-free, with robust liquidity and strong return ratios. This financial flexibility supports its growth initiatives without burdening the balance sheet.

CONSOLIDATED FINANCIAL PERFORMANCE (Rs in Cr.)

Core Business and Primary Product Portfolio Lincoln Pharma

Lincoln Pharma’s core business is centered around developing, manufacturing, and marketing a diverse range of pharmaceutical formulations. The company’s primary product portfolio includes:

• A wide range of therapeutic areas with a focus on anti-infectives, respiratory system medications, gynecology products, cardio & CNS drugs, anti-diabetics, and anti-malaria treatments.
• Over 1700 registered products, with an additional 700 products in the pipeline.
• An expanding portfolio in lifestyle and chronic segments, particularly focusing on women’s healthcare and dermatology.
• Dosage forms Spanning tablets, capsules, dry syrups, liquid vials, injectables, and ointments. 

In addition to its own branded products, the company also engages in contract manufacturing for other pharmaceutical companies ~ This business offers a much more lucrative profit margin potential.

Financial Highlights

Revenue Diversification

1. Exports Contribution: Exports accounted for 61.2% of total revenue in Q1 FY25, up from 58.3% in Q1 FY24. This increase highlights the company’s growing focus on international markets.
2. Domestic Sales: Domestic sales contributed 38.8% in Q1 FY25, down from 41.7% in Q1 FY24, indicating a relatively slower growth rate in the local market.

Additionally, exports are a more margin-accretive business, which supports overall profitability and reflects the company’s strategic emphasis on scaling operations in higher-margin global markets.

Geographic Reach

Lincoln Pharma serves a global market and has a presence in various regions. Key details include:

The company exports to over 60 countries, including

• East and West Africa
• Central, North, and Latin America
• Southeast Asia
• The Gulf Cooperation Council (GCC)
• Canada

Lincoln Pharma plans to expand its export network to over 90 countries within the next 2-3 years.

Domestically, the company operates in more than 26 states across India with the top-performing states being Uttar Pradesh, Assam, and Orissa

Additionally, the company plans to continue expanding into regulated markets, including Canada and potentially the US or similar markets in the future~ Entering these markets could be a Major breakthrough and a game changer for Lincoln

SHAREHOLDING PATTERN

• The company’s promoters have significantly raised their stakes from 32% in FY20 to an impressive 50% as of September 2024, showcasing their strong confidence in the company’s future growth. 
• Foreign Institutional Investors (FIIs) have increased their stake in the company, rising to 5% as of Sep 2024 from 1.74% in June 2023, demonstrating growing confidence in Lincoln Pharma’s future prospects.

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Rishav Kaushik

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