UBS initiates 'Buy' on Shaily Engineering Plastics; sees 60% upside

Global brokerage UBS has initiated coverage on Shaily Engineering Plastics shares with a ‘Buy’ rating and a target price of ₹4,000 per share, implying 60.2 per cent upside from Monday’s close of ₹2,496.75. The brokerage believes the market is underestimating Shaily’s capabilities and multiple growth drivers across its business segments.Why is UBS bullish on Shaily Engineering Plastics?Multiple growth leversUBS expects higher traction and improved capacity utilisation in Shaily’s consumer and industrial segments, where it supplies components to global clients such as IKEA, GE Appliances and P&G. The brokerage also sees Shaily as a potential beneficiary of a favourable India–US trade deal and tariff reductions, which could enhance India’s competitiveness versus other emerging-market manufacturing destinations. In addition, Shaily is in the process of onboarding a large customer in the consumer electronics and semiconductor space, which UBS believes offers significant upside optionality beyond its base growth assumptions. CATCH STOCK MARKET UPDATES TODAY LIVEShaily set for big play in high-entry-barrier GLP-1 marketThe patent for GLP-1 drug semaglutide is set to expire in 2026 in key markets such as India, Canada and Brazil. These markets together could represent a total addressable market of 550–600 million devices, translating into ₹800–850 crore in revenue by 2030. Based on the scenario, analysts peg Earnings before interest, tax, depreciation and amortisation (Ebitda) to grow at 39 per cent compound annual growth rate (CAGR) in a low-case scenario; 52 per cent CAGR in the base case, and 59 per cent CAGR in a high-case scenario over FY25–30E. Shaily has partnered with 23–24 global pharma companies for generic GLP-1 devices, which could give it a 50–60 per cent market share across these three geographies, according to the brokerage. The segment has high entry barriers due to patented technology, a limited number of global competitors and complex regulatory requirements, which also make it hard for pharma companies to switch injector suppliers. Given this backdrop, UBS estimates the company’s healthcare segment revenue is to grow roughly 96 per cent CAGR between FY25 and FY28, with its contribution to overall revenue rising from 21 per cent to 55 per cent. ALSO READ | Neuland, Lupin, Divi's lead domestic, CDMO surge amid US generics headwindsConsumer and industrial segments set for steady growthShaily supplies a range of plastic and metal components to leading global brands such as IKEA, Gillette, P&G, GE Appliances and Schaeffler, catering to both domestic and export markets. The recent softness in these businesses has been driven largely by unfavourable tariff structures relative to other emerging-market manufacturing hubs that compete with India, according to UBS analysis. The brokerage reckons that any trade or tariff-related agreement that narrows this gap and offers more competitive duties versus peer countries would likely benefit both India’s manufacturing base and Shaily’s export prospects. Shaily’s consumer and industrial businesses are expected to deliver around 18 per cent revenue CAGR over FY25–28, supported by potential improvement in tariff positioning, and better utilisation of its currently underused capacity, which should help expand margins and improve return on capital employed (ROCE). The consumer electronics segment remains an additional optionality on top of this base growth. (Disclaimer: The views and investment tips expressed by UBS in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)