Tale of the Tape 

Howdy folks. Welcome back to the market of stocks!

Markets were up, tracking gains across global markets after Jerome Powell raised hopes of a possible rate cut in September. The Nifty (+0.4%) ended in the green but failed to settle past the 25k mark. Maybe another day! Broader markets were muted, with Midcaps (+0.1%) posting minor gains and Smallcaps ending flat. The advance-decline ratio was evenly split.

Most sectors were up or ended flat. IT stocks (+2.4%) led the rally, followed by Real Estate (+0.8%) and Metals (+0.7%). PSU Banks (-0.3%) saw minor cuts.

In today’s issue of the Daily Rip, we look at the BIG opportunity in India’s contract drug manufacturing sector, Vikran Engineering’s upcoming IPO, why paper stocks zoomed and more.

Honourable mentions: 

IndiGo and Max Healthcare will enter the Nifty; Hero MotoCorp and IndusInd Bank will exit. Vodafone-Idea (+5%) extended its recent rally on reports of possible AGR relief. Meanwhile, Anil Ambani Group stocks were locked in -5% lower circuits after the CBI booked him for alleged bank fraud.

Check out the NSE 500 heatmap:

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Chemistry For Success

Hi guys, today we’re looking at what experts are calling the “next big thing” -- India’s contract research, development and manufacturing (CRDMO) industry. The sector is projected to grow at 18% CAGR over the next five years! Here’s what you need to know.  

Zooming in: There are three big triggers at play. Firstly, companies are FINALLY moving from being chemical firms (supplying ingredients) to becoming key strategic partners by helping in research and drug development. This means we’re starting to compete with China. Analysts say China+1 is currently a $700 million opportunity and could rise to $1.4 billion. Finally, this structural shift is clearest in the weight loss-drug segment. 

Here are Jefferies top 3 picks for the sector:

1) Sai Life Sciences:The company is seeing “unprecedented” demand from Big Pharma in shifting their projects away from China. It’s currently nabbed four major CDMO projects away from the Chinese and is managing 12-13 other ‘tech transfer’ contracts. To keep up with this it plans to add 450KL capacity and is targeting EBITDA margins of 28%-30% over the next three years. The brokerage sees a +20% upside from current levels.

2) Cohance: The firm’s strength comes from its ADC (antidrug body conjugate) capabilities aka targeted chemotherapy to fight cancer. Jefferies says it's already the “exclusive supplier” for two commercial blockbuster ADCs. Combined with a strong small molecule pipeline, it’s projecting sales to grow at 20% CAGR over FY25-28! The brokerage’s target price is Rs 1,150 p/sh; +28% potential upside.

3) Divi’s Labs: It probably has the best GLP-1 pipeline amongst Indian CRDMO players. Non-semaglutide GLP-1 drugs will be a $1.2 bn opportunity by 2030 in India and Divi’s current pipeline molecules account for ~85% of that opportunity. PS - Weight loss products should add ~$250 million in sales for Divi’s by FY28. To top things off, as the biggest manufacturer, Divi’s probably will benefit from China+1 the most. Jefferies sees a +14% rally from current levels.

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Vijay Kedia Portfolio Changes

Who doesn’t want to know which stocks legendary investor Vijay Kedia is currently holding? In this video, we cover his top holdings and latest portfolio updates along with fundamental views on the same.