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Dishman Pharma
Recovery ahead; maintain Buy
Q2FY11 results. As per our expectations, Dishman registered
weak Q2FY11 results; we estimate recovery from Q3FY11.
Revenue slid 2.1% yoy; however, adjusted net profit fell a sharp
32.3% yoy due to a 570-bp fall in EBITDA margin owing to
absence of contract-research business.
Highlights. Revenue drop was driven by 6.8% fall in the
marketable molecules (MM) and 0.5% decrease in the CRAMS
businesses. CRAMS fell due to postponement of a few contractresearch
projects that would be executed in the coming quarters.
This also resulted in lower margins, which would recover in the
coming quarters.
Outlook. We believe that the worst is now over and recovery
should occur from Q3FY11 on the back of: i) the stabilising base
CRAMS business, ii) commercialisation of the high potential
(HIPO) facility and iii) beginning of API supply (patented
product) to an EU major in Q4FY11.
Lower estimates. We lower our FY11-13e revenue 3-6% owing
to postponement of a few contract research deals and less revenue
from the MM business. We lower PAT 13.7%, 6.3% and 7.7% for
FY11e, FY12e and FY13e respectively.
Valuation and risks. We maintain Buy, given recovery in
business from Q3FY11 and attractive valuations. However, we
lower our target price to `246 from `258 due to our revision in
estimates. Risk: Delay in execution of CRAMS contracts.
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