JPMorgan initiates coverage on Indegene stock, shares target price 

JPMorgan on Tuesday has initiated coverage on the recent market debutant Indegene Ltd with a 'Neutral' rating, saying the stock trades at a premium to most TechOps firms and at the upper end of Indian midcap tech services peers. With full valuations, and clouded current visibility on new drug launches for its clients, it finds Indegene fairly priced.

Indegene is a niche tech operations (TechOps) vendor focused on the global life sciences industry that scaled rapidly during Covid. The growth slowed down post Covid due to client-specific factors and weakening macros after lightening drug launch cycle of its big pharma clients.

The stock got listed on May 13 this year at a 43 per cent premium over the issue price of Rs 452. On Tuesday, it traded at Rs 565.70 on BSE, up 0.4 per cent. JPMorgan suggested a target price of Rs 570, hinting at a limited upside potential ahead.

"We expect growth to bounce back to early teens from FY26. We expect Indegene to enjoy low-teens secular growth thanks to low tech penetration in the life sciences ops industry, strong track record and differentiated service offerings," JPMorgan said.

JPMorgan called Indegene a high-quality ops vendor that deserves a premium over diversified BPM players and several mid-sized services firms, given higher productivity, profitability and secular growth potential. But it finds current valuations at 21 per cent premium over BPM and 12 per cent premium over mid-sized peers already baking in the recovery. The foreign brokerage said it would wait for a better entry point.

Indegene's TechOps services enjoy solid long-term growth potential with just 20 per cent of life sciences operations spends ($156 billion in 2022) thanks to the need for greater digitisation, lack of digital talent, rising cost of R&D and SG&A at pharma companies, JPMorgan said.

Indegene's long track record, 22 per cent staff background in pharma and proprietary tools drive best-of-breed process expertise in managing efficient operations, JPMorgan said.

"It enjoys strong client relationships with 19 of the 20 largest global biopharma firms that has helped it scale its top 4 clients above $25m and top 10 clients to $16m in average revenues," it said.

JPMorgan said Indegene leads mid-sized IT services and BPO companies in per capita revenue and profits, highlighting high value addition and ability to use tech effectively in its service delivery despite a very offshore-heavy operation.

"High client concentration, insourcing from top clients, changes in drug launch pipeline, regulations impacting the pharma sector and potential TAM risk from more aggressive GenAI adoption are the key risks to Indegene's growth story," it said.