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Divi's Lab - Stellar 3Q; beats expectations
„3Q PAT up 45% YoY, 20% ahead of BofA-MLe; Retain Buy
Divis 3Q PAT at Rs984mn (up 45% YoY, 37% QoQ) surprised positively led by
54% growth in sales (at Rs3.1bn, up 21% QoQ) sharp margin rebound QoQ.
Strong traction in orderflow sustained sales momentum, while 454bps QoQ
rebound in EBITDA margins (at 38.5%) was in line with expectations. Upcoming
new capacity, ramp up in orderflow and better product mix would help achieve
27% EPS CAGR over FY11-13E. Retain Buy with PO of Rs715/sh.
Margins to sustain at 38-40% levels; Revenue outlook robust
Sharp bounce back in 3Q margins reflected underlying business profitability as
well as lumpiness altering business mix. We believe EBITDA margins would
sustain at 38-40% on an annualized basis. 9MFY11 sales grew 33%, reflecting
robust recovery. We expect sales momentum to sustain with Vizag SEZ capacity
boost (Apr-11), upcoming patent cliff helping generic API biz enabling Divis post
strong revenue CAGR of 24%, resulting in EPS CAGR of 27% over FY11-13E.
Revenue visibility aided by Rs2.5bn capex plan
We expect Vizag SEZ (Rs2bn capex) plant to be commissioned in Apr’11,
contributing to revenues from 2HFY12E, ramping up to peak sales of Rs4-5bn
(~25% of FY11 sales) by FY13 to provide comfort on revenue visibility. We also
expect high-margin carotenoids business to ramp up to US$25-30mn sales by
FY12E (vs ~US$15mn in FY11E).
Reasonable valuations; Divis preferred play in CRAMS
Divis trades at 17.7x FY12E P/E, which is at ~15% discount to its historic average
as well as the sector. We prefer Divis in the Indian CRAMS space due to (a) pureplay CRAMS focus & strong customer relationships (70% repeat business), (b)
strong return ratios (RoE’s of ~22%), near zero debt (Rs4.6bn cash or Rs35/sh),
& (c) stronger margin profile of 35%+ compared to 18-22% for peers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Divi's Lab - Stellar 3Q; beats expectations
„3Q PAT up 45% YoY, 20% ahead of BofA-MLe; Retain Buy
Divis 3Q PAT at Rs984mn (up 45% YoY, 37% QoQ) surprised positively led by
54% growth in sales (at Rs3.1bn, up 21% QoQ) sharp margin rebound QoQ.
Strong traction in orderflow sustained sales momentum, while 454bps QoQ
rebound in EBITDA margins (at 38.5%) was in line with expectations. Upcoming
new capacity, ramp up in orderflow and better product mix would help achieve
27% EPS CAGR over FY11-13E. Retain Buy with PO of Rs715/sh.
Margins to sustain at 38-40% levels; Revenue outlook robust
Sharp bounce back in 3Q margins reflected underlying business profitability as
well as lumpiness altering business mix. We believe EBITDA margins would
sustain at 38-40% on an annualized basis. 9MFY11 sales grew 33%, reflecting
robust recovery. We expect sales momentum to sustain with Vizag SEZ capacity
boost (Apr-11), upcoming patent cliff helping generic API biz enabling Divis post
strong revenue CAGR of 24%, resulting in EPS CAGR of 27% over FY11-13E.
Revenue visibility aided by Rs2.5bn capex plan
We expect Vizag SEZ (Rs2bn capex) plant to be commissioned in Apr’11,
contributing to revenues from 2HFY12E, ramping up to peak sales of Rs4-5bn
(~25% of FY11 sales) by FY13 to provide comfort on revenue visibility. We also
expect high-margin carotenoids business to ramp up to US$25-30mn sales by
FY12E (vs ~US$15mn in FY11E).
Reasonable valuations; Divis preferred play in CRAMS
Divis trades at 17.7x FY12E P/E, which is at ~15% discount to its historic average
as well as the sector. We prefer Divis in the Indian CRAMS space due to (a) pureplay CRAMS focus & strong customer relationships (70% repeat business), (b)
strong return ratios (RoE’s of ~22%), near zero debt (Rs4.6bn cash or Rs35/sh),
& (c) stronger margin profile of 35%+ compared to 18-22% for peers.
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