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Unichem Laboratories- Incremental overheads put extra pressure…
Unichem’s Q3FY11 numbers were below our expectations. Total
revenues grew 14.1% YoY to | 197.1 crore, almost in line with our
expectation of | 201 crore. EBITDA margins sharply declined ~ 660 bps
against our expectation of ~250 bps dip. This was mainly due to higher
sales & marketing expenses (up ~| 9 crore YoY), incremental sample
cost and change in the product mix. Niche generics, the wholly-owned
subsidiary of the company, recorded sales of £2.17 million and net loss
of £0.38 million. We believe most of the incremental sales & marketing
expenses during the quarter were one-off in kind although we have
some concern over the performance of antibiotic drug Ampoxin. We
expect ULL’s profits to normalise from Q4FY11 onwards. We have
revised our target price on the stock to | 227 with a BUY rating.
ƒ Highlights of the quarter
ULL’s domestic formulation business grew 11% YoY to | 149.1 crore
driven by the chronic care segment, which grew ~14% YoY. ULL’s acute
segment grew a moderate 7.5% YoY as its key brand Ampoxin witnessed
de-growth of ~10% YoY. ULL launched H2 receptor antagonist Lafuditine
in the domestic market under the brand name Lafudac. The drug,
launched in US market through retail chain, clocked sales of ~| 3.5 crore.
Valuation
ULL derives ~50% of domestic formulation sales from the fast growing
chronic therapies. Its Losar brand (anti-hypertensive) which has annual
sales of ~ | 150 crore and a market share of ~32% is growing at 17-18%
per annum. As the overall domestic chronic therapeutic segment is
expected to grow at 15-18% per annum, we expect ULL’s sales from the
chronic segment to grow in line with industry growth. Overall, we expect
revenues and profits to grow at a CAGR of 14.5% and 11.9% in FY10-13E.
The stock is trading at 9.5x FY13E EPS of | 20.6. We have arrived at a
target price of | 227 based on 11x FY13E EPS of | 20.6. We have assigned
a BUY rating, implying ~16% upside from current levels.
ƒ Total revenues up 14.1% YoY
Total income from operations on a standalone basis increased by 14.1%
YoY to | 197.1 crore (in line with our expectation of | 201 crore) driven by
growth in formulation exports (up 35.9% YoY) and the domestic API
business (39.1% YoY). Due to muted growth in the generic formulations
business and modest 11.9% growth in the branded formulations
business, the overall domestic formulation business witnessed moderate
growth of 11% YoY to | 149.1 crore. However, the chronic care segment
grew ~14% YoY and acute segment grew ~8% YoY. Lower growth in the
acute segment was due to ~10% de-growth in its key brand Ampoxin (an
Anti-biotic). To arrest the fall in Ampoxin sales, ULL incurred higher sales
and marketing expenses (~| 9 crore) during the quarter, which affected
the margins. During the quarter, ULL launched H2 receptor antagonist
Lafuditine (CVS) in the domestic market under the brand name Lafudac.
Formulation exports grew 35.9% YoY to | 26.8 crore on account of
incremental product launches especially in the US, where a product that
was launched through a retail chain in Q2FY11 registered sales of ~ | 3.5
crore during the quarter. ULL is planning to launch its sixth product
during Q4FY11.
Total sales from the API business grew 10.4% to | 19.2 crore, driven by
~39% YoY growth in domestic APIs. The higher growth was attributable
to new launches in the domestic market. API exports, however, grew just
1.6% YoY to | 13.3 crore.
During the quarter, Niche Generics, the 100% UK subsidiary, recorded
sales of £2.168 million and net loss of £376,000. Unichem
Pharmaceuticals US Inc., the 100% US subsidiary, recorded sales of
US$786,000 and net loss of US$206,000.
ƒ EBIDTA margin dips 660 bps
EBITDA margins sharply declined ~660 bps to 20% due to an increase in
overheads on account of new addition of 600 odd medical
representatives, commissioning of new manufacturing facilities at Baddi
and Sikkim and higher marketing expenses. The EBIDTA declined 14% to
| 39.41 crore YoY.
ƒ Net profit declines 23.9% YoY
The net profit declined 23.9% YoY to | 25.6 crore mainly due to higher
operating expenses and increase in depreciation charges and higher tax
provision on account of higher MAT.
Valuation
Around ~50% of ULL’s sales in the domestic formulation come from fast
growing chronic therapies. Its Losar brand (anti-hypertensive), which has
annual sales of ~ | 150 crore and marketing share of ~32% is growing at
17-18% per annum. As the overall domestic chronic therapeutic segment
is expected to grow at 15-18% per annum, we expect ULL’s sales from
the chronic segment to grow inline with the industry. We expect ULL to
take corrective measures to arrest the de-growth in Ampoxin sales. ULL
plans to launch 15 products (including line extensions) annually in the
domestic market. In the US, ULL has filed 15 ANDAs and is currently
marketing five products. It is planning to launch its sixth product in
Q4FY11. ULL is in final talks with MNCs players to start CRAMS business.
We expect CRAMS to contribute substantially in FY12 and FY13. The
company is virtually debt-free.
We expect revenues and profits to grow at a CAGR of 14.5% and 11.9%
in FY10-13E. The stock is trading at 9.5x FY13E EPS of | 20.6. We
estimate the fair value of ULL at | 227 based on 11x FY13E EPS of | 20.6.
We are assigning a BUY rating to the stock, implying ~16% upside from
current levels.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Unichem Laboratories- Incremental overheads put extra pressure…
Unichem’s Q3FY11 numbers were below our expectations. Total
revenues grew 14.1% YoY to | 197.1 crore, almost in line with our
expectation of | 201 crore. EBITDA margins sharply declined ~ 660 bps
against our expectation of ~250 bps dip. This was mainly due to higher
sales & marketing expenses (up ~| 9 crore YoY), incremental sample
cost and change in the product mix. Niche generics, the wholly-owned
subsidiary of the company, recorded sales of £2.17 million and net loss
of £0.38 million. We believe most of the incremental sales & marketing
expenses during the quarter were one-off in kind although we have
some concern over the performance of antibiotic drug Ampoxin. We
expect ULL’s profits to normalise from Q4FY11 onwards. We have
revised our target price on the stock to | 227 with a BUY rating.
ƒ Highlights of the quarter
ULL’s domestic formulation business grew 11% YoY to | 149.1 crore
driven by the chronic care segment, which grew ~14% YoY. ULL’s acute
segment grew a moderate 7.5% YoY as its key brand Ampoxin witnessed
de-growth of ~10% YoY. ULL launched H2 receptor antagonist Lafuditine
in the domestic market under the brand name Lafudac. The drug,
launched in US market through retail chain, clocked sales of ~| 3.5 crore.
Valuation
ULL derives ~50% of domestic formulation sales from the fast growing
chronic therapies. Its Losar brand (anti-hypertensive) which has annual
sales of ~ | 150 crore and a market share of ~32% is growing at 17-18%
per annum. As the overall domestic chronic therapeutic segment is
expected to grow at 15-18% per annum, we expect ULL’s sales from the
chronic segment to grow in line with industry growth. Overall, we expect
revenues and profits to grow at a CAGR of 14.5% and 11.9% in FY10-13E.
The stock is trading at 9.5x FY13E EPS of | 20.6. We have arrived at a
target price of | 227 based on 11x FY13E EPS of | 20.6. We have assigned
a BUY rating, implying ~16% upside from current levels.
ƒ Total revenues up 14.1% YoY
Total income from operations on a standalone basis increased by 14.1%
YoY to | 197.1 crore (in line with our expectation of | 201 crore) driven by
growth in formulation exports (up 35.9% YoY) and the domestic API
business (39.1% YoY). Due to muted growth in the generic formulations
business and modest 11.9% growth in the branded formulations
business, the overall domestic formulation business witnessed moderate
growth of 11% YoY to | 149.1 crore. However, the chronic care segment
grew ~14% YoY and acute segment grew ~8% YoY. Lower growth in the
acute segment was due to ~10% de-growth in its key brand Ampoxin (an
Anti-biotic). To arrest the fall in Ampoxin sales, ULL incurred higher sales
and marketing expenses (~| 9 crore) during the quarter, which affected
the margins. During the quarter, ULL launched H2 receptor antagonist
Lafuditine (CVS) in the domestic market under the brand name Lafudac.
Formulation exports grew 35.9% YoY to | 26.8 crore on account of
incremental product launches especially in the US, where a product that
was launched through a retail chain in Q2FY11 registered sales of ~ | 3.5
crore during the quarter. ULL is planning to launch its sixth product
during Q4FY11.
Total sales from the API business grew 10.4% to | 19.2 crore, driven by
~39% YoY growth in domestic APIs. The higher growth was attributable
to new launches in the domestic market. API exports, however, grew just
1.6% YoY to | 13.3 crore.
During the quarter, Niche Generics, the 100% UK subsidiary, recorded
sales of £2.168 million and net loss of £376,000. Unichem
Pharmaceuticals US Inc., the 100% US subsidiary, recorded sales of
US$786,000 and net loss of US$206,000.
ƒ EBIDTA margin dips 660 bps
EBITDA margins sharply declined ~660 bps to 20% due to an increase in
overheads on account of new addition of 600 odd medical
representatives, commissioning of new manufacturing facilities at Baddi
and Sikkim and higher marketing expenses. The EBIDTA declined 14% to
| 39.41 crore YoY.
ƒ Net profit declines 23.9% YoY
The net profit declined 23.9% YoY to | 25.6 crore mainly due to higher
operating expenses and increase in depreciation charges and higher tax
provision on account of higher MAT.
Valuation
Around ~50% of ULL’s sales in the domestic formulation come from fast
growing chronic therapies. Its Losar brand (anti-hypertensive), which has
annual sales of ~ | 150 crore and marketing share of ~32% is growing at
17-18% per annum. As the overall domestic chronic therapeutic segment
is expected to grow at 15-18% per annum, we expect ULL’s sales from
the chronic segment to grow inline with the industry. We expect ULL to
take corrective measures to arrest the de-growth in Ampoxin sales. ULL
plans to launch 15 products (including line extensions) annually in the
domestic market. In the US, ULL has filed 15 ANDAs and is currently
marketing five products. It is planning to launch its sixth product in
Q4FY11. ULL is in final talks with MNCs players to start CRAMS business.
We expect CRAMS to contribute substantially in FY12 and FY13. The
company is virtually debt-free.
We expect revenues and profits to grow at a CAGR of 14.5% and 11.9%
in FY10-13E. The stock is trading at 9.5x FY13E EPS of | 20.6. We
estimate the fair value of ULL at | 227 based on 11x FY13E EPS of | 20.6.
We are assigning a BUY rating to the stock, implying ~16% upside from
current levels.
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