Rubicon Research shares can rally 54%, Motilal Oswal projects in 'bull case' scenario

Shares of Rubicon Research Ltd., which are trading with gains of over 3% today, can rise as much as 54%, brokerage firm Motilal Oswal projected in its bull-case scenario while initiating coverage on the pharmaceutical company on Friday, October 31.

The brokerage said Rubicon Research is a fast-growing, research and development-driven pharmaceutical manufacturing company focused on regulated markets, particularly the US.

Over the past decade, Rubicon has built a sustainable moat through full-spectrum capabilities across multiple dosage forms, a strong track record in specialty projects, and supporting manufacturing capacities with consistent compliance for US markets.

The company has also maintained a focus on commercial success, the brokerage noted.

Motilal Oswal has initiated coverage with a 'Buy' rating and a price target of ₹740 per share, implying a potential upside of 22% from Thursday's closing price. In its bull-case scenario, the brokerage has projected a target of ₹930, suggesting a potential 54% upside from current levels.

The brokerage believes Rubicon is building a robust business model driven by a multi-disciplinary, data-backed, RoI-centric product selection framework. Its consistent compliance record, it added, provides a strong foundation for sustained growth in earnings and return ratios.

Between FY22 and FY25, Rubicon's revenue rose at a CAGR of 60% to ₹1,280 crore. From an operational loss of ₹39.2 crore in FY22, the company reported EBITDA of ₹250 crore in FY25, with a margin of 19.9%. Net loss of ₹67 crore in FY22 turned into a PAT of ₹130 crore in FY25, translating into a ROE of 29%.

Looking ahead, Motilal Oswal expects revenue, EBITDA, and PAT to grow at a CAGR of 29%, 32%, and 43%, respectively, over FY25-28, reaching ₹2,780 crore, ₹580 crore, and ₹390 crore.

Considering a strong earnings CAGR of 43% over FY25-28 and over 30% RoE (adjusted for the recent equity issue), the brokerage believes Rubicon deserves to trade at a premium valuation.