Israeli Drugmaker Rafa Labs Receives Buy Recommendation Amid Growth Prospects

Investment house Leader Capital Markets has initiated coverage of Rafa Laboratories, an Israeli pharmaceutical company, with a "buy" recommendation and a price target of NIS 24 per share. This target represents a significant 45% increase from the current market price of NIS 16.5, valuing the company at approximately NIS 1.677 billion. Analyst Sabina Levi highlighted that Rafa is trading at a price-to-earnings ratio of about 13 times its projected 2026 earnings and 10 times its projected 2027 earnings. Leader Capital believes the current valuation does not fully reflect the company's growth potential and expected improvements in its financial results.

Rafa, founded in 1937, is one of Israel's top five pharmaceutical firms, employing around 260 people. Acquired by FIMI Fund in 2020, which now holds over 52.9% of its shares, the company also has the Levin family and public shareholders. Rafa operates a manufacturing site in Jerusalem and benefits from a reduced effective tax rate of about 10% under Israel's Law for the Encouragement of Capital Investments.

The pharmaceutical division is a key growth engine, generating NIS 262.8 million in revenue in 2025, accounting for 63% of Rafa's total income. This segment offers over 100 products across eight therapeutic areas and includes exclusive representation agreements with international pharmaceutical companies. Rafa is also preparing to launch more than ten new products, which are projected to achieve combined annual sales of NIS 150-250 million within four years.

Additionally, Rafa has a significant biodefense operation focused on developing and manufacturing auto-injectors for emergency situations, trauma, and unconventional threats. The company is collaborating with Israeli government and defense bodies, and through its TXA project with the U.S. entity BARDA, it is developing an auto-injector for severe bleeding, potentially securing up to $186 million in funding.

Leader Capital forecasts Rafa's revenues to grow from NIS 418.4 million in 2025 to NIS 656.1 million by 2028, with net profit rising from NIS 100.3 million to NIS 203.9 million in the same period. Profitability is also expected to improve, partly due to the higher margins in the biodefense sector. The forecasts do not include potential upside from early product approvals or future strategic acquisitions. Rafa also holds a 40% stake in ExCEEd Orphan, a Czech company marketing orphan drugs in Europe, with options to increase its stake to 60% in 2027 and full ownership in 2028, which could significantly impact reported revenues.