Valuation and view
- Key growth drivers for FY11/12 will be: 1) Traction in the company's Insulin initiative with Pfizer, 2) Ramp-up in contract research business and 3) Incremental contribution from immuno-suppressants API supplies.
- However, higher R&D costs, increased depreciation and higher expenses linked to the scale-up of the domestic formulations business will continue to temper down earnings growth.
- Option values for future include separate listing of Syngene and a potential out-licensing of the oral insulin NCE.
- We estimate EPS of Rs17 for FY11E (up 15.7%) and Rs20.3 for FY12E (up 19.5%) leading to 17% earnings CAGR for FY10-12. Our estimates exclude the upsides from the upfront & milestone payment from Pfizer as these are valued separately on DCF basis.
- The stock is currently valued at 24.5x FY11E and 20.5x FY12E earnings adjusted for DCF value of Rs25 for the Pfizer deal.