Anand Rathi Sees 40% Rally in Multibagger Healthcare Stock Despite 600% Rise in Five Years

In a bold move underscoring confidence in India's healthcare growth story, leading brokerage Anand Rathi has projected a further 40% upside in the stock of a multibagger pharmaceutical company that has already delivered a staggering 600% return over the past five years. Despite the sharp run-up, analysts believe the company is still undervalued given its scalable business model, robust earnings growth, and sector tailwinds.

The stock in focus is IOL Chemicals and Pharmaceuticals Ltd., a key player in the Active Pharmaceutical Ingredients (API) and specialty chemicals segment. Trading around ₹470 levels as of June 25, the brokerage has issued a “Buy” recommendation with a target price of ₹660, indicating significant headroom for gains.

IOL Chemicals: From Penny Stock to Pharma Star

Over the last half-decade, IOL Chemicals has transformed from a small-cap, under-the-radar stock into a wealth creator for long-term investors. In 2020, the stock was trading near ₹65. Today, it stands close to ₹470 — a near 7x return.

This growth story has been driven by:

• Rising global demand for APIs, particularly Ibuprofen.

• Backward integration and manufacturing efficiency.

• Strong free cash flow and debt reduction.

• Diversification into specialty chemicals.

Anand Rathi's note highlights that the company’s “strong cash position, efficient operations, and product diversification” make it a compelling play even after significant price appreciation.

Analyst Commentary: Why There’s Still Steam Left

“We believe the market is yet to fully price in IOL's strategic shift from being a bulk API producer to a diversified specialty chemical player,” said Ravi Ranjan, Senior Research Analyst at Anand Rathi.

The firm estimates a compound annual growth rate (CAGR) of 15% in earnings over FY25–FY28, driven by capacity expansion, export opportunities, and high-margin product additions.

“IOL’s capex plans of over ₹350 crore over the next two years will likely enhance its specialty chemicals portfolio and reduce volatility in API earnings,” Ranjan added.

The brokerage is also upbeat on the company’s clean balance sheet. With zero long-term debt, healthy return ratios (ROCE of 18%), and a P/E ratio of under 12x on FY26 earnings, the stock trades at a discount compared to its industry peers.

Healthcare Sector Boom: A Rising Tide Lifts All Boats

India’s pharmaceutical and healthcare sectors are witnessing renewed investor interest amid global supply chain rebalancing and domestic policy support.

According to data from India Ratings & Research, India’s API industry is expected to grow at 10–12% annually over the next five years, supported by China+1 sourcing strategy and PLI (Production-Linked Incentive) schemes. As a home-grown API manufacturer with cost leadership, IOL is poised to benefit disproportionately, say experts.

“The long-term secular trend in pharma exports and the rising share of specialty chemicals in total revenue are major tailwinds for IOL Chemicals,” said Neha Jain, Pharma Analyst at Prabhudas Lilladher, who agrees with the positive long-term view.

Valuation Comfort Despite Past Rally

While many investors may be wary of entering a stock that has already multiplied six-fold, Anand Rathi contends that valuations remain compelling due to the company's earnings visibility and sector tailwinds.

The brokerage values IOL at 15x FY26E earnings, a reasonable premium to its historical average, to arrive at a target price of ₹660, implying a 40% upside from current levels.

The report notes, “Given its consistent RoCE, improving EBITDA margins, and high promoter holding of over 43%, the stock offers a unique combination of growth and stability.”

Investor Outlook: Can the Multibagger Repeat Its Magic?

Retail and institutional investors are watching closely. While some early entrants may be tempted to book profits, long-term holders see continued value, especially with global API demand on the rise and domestic policy support.

However, risks remain. Regulatory hurdles, raw material cost pressures, and overdependence on key products like Ibuprofen could impact short-term earnings. Yet, IOL’s diversification strategy and increasing exports may help cushion such risks.

Market experts advise a staggered investment approach. “It’s important not to chase momentum, but a systematic investment plan (SIP)-style approach can help mitigate volatility while building exposure to fundamentally strong companies like IOL,” said Manoj Khandelwal, Portfolio Manager at BOB Capital Markets.

Anand Rathi’s bullish stance on IOL Chemicals underscores a broader confidence in India's healthcare sector and the potential of homegrown pharma firms to dominate globally. While the stock’s past performance is nothing short of spectacular, analysts believe its journey is far from over.

With scalable growth levers in place and a healthy valuation buffer, investors looking for exposure to the pharmaceutical sector may find IOL Chemicals a worthy long-term bet — even after a 600% rally.