Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dishman Pharmaceuticals (Dishman) reported lower-than-expected results for
3QFY2011 impacted by the poor performance of Carbogen Amcis, currency
movement and rising material costs. On the guidance front, management
expects revenues to remain flat, margins to remain under pressure owing to
which net profit would decline in FY2011. Going forward, excluding Carbogen
Amcis, the company has guided a 15% top-line growth for FY2012. We have
lowered our estimates due to the slower-than-expected recovery in the CRAMS
segment as well as the time lag required for restructuring of Carbogen Amcis to
fructify. However, with the stock having corrected and at current levels factoring
in most of the negatives, we maintain a Buy on the stock.
Poor performance across key segments: Dishman reported net sales of `232cr
(`222cr), a single-digit growth of 4% yoy and below our estimate of `291. The
company clocked revenues of `158cr (`161cr) in the CRAMS segment, down 2%
on low pick-up on the contract research front. Gross margins dropped to 64%
(73.4%) impacted by higher material costs. OPM at 11% (23%) came lower than
our estimate impacted by the pricing pressure. Consequently, net profit declined
by a substantial 95% to `1.7cr (`33.1cr) during the quarter.
Outlook and Valuation: On the back of the slower-than-expected recovery in the
CRAMS segment and the restructuring being undertaken at Carbogen Amcis, we
have lowered our forecast for both FY2011 and FY2012. Management expects a
flat performance in FY2011 on the top-line front, with a decline in net profit as
the margins are expected to be under pressure. However, we expect net sales
and net profit to come in at `1,045cr and `77.3cr respectively, in FY2012. At
current levels, Dishman is trading 13.8x and 10.7x FY2011E and FY2012E
earnings, respectively. We maintain a Buy on the stock, with a Target Price of
`123.
Recommendation Rationale
Capex benefits to accrue from FY2012 onwards: Dishman is well placed to
benefit from the organic capex of Rs300cr incurred over the last three years
towards building its China and Hipo facilities and expansion of other existing
facilities at its Bavla unit targeting the European and Asian markets. Post the
new facilities getting operational, Dishman is likely to enter into long-term API
supply contracts with these players resulting in stable revenue flow going
ahead. The company’s ties with the global innovators would also strengthen
apart from reducing its dependence on Abbott.
Abbott contract back on track: Abbott has been one of Dishman’s key clients
(13% sales and 17% of operating profit in FY2010). As per a long-term
contract, Dishman primarily supplies Eprosartan (Teveten) API to the company.
Revenues from the contract have risen at a CAGR of 36.1% to Rs174.0cr over
FY2007-09 driven by increasing off-take of Eprosartan resulting in higher
margins. However, during FY2010, key products of Solvay, viz. Tricor and
Teveten de-grew on account of inventory rationalisation in the channels and
acquisition by Abbott leading to revenues of Rs120cr. With the global
inventory rationalisation likely to end and the acquisition of Solvay by Abbott
now completed, we expect the contract to normalise in FY2011.
Outlook and Valuation
On the back of the slower-than-expected recovery in the CRAMS segment and
the restructuring being undertaken at Carbogen Amcis, we have lowered our
forecast for both FY2011 and FY2012. Management expects a flat
performance in FY2011 on the top-line front, with a decline in net profit as the
margins are expected to be under pressure. However, we expect net sales and
net profit to come in at `1,045cr and `77.3cr respectively, in FY2012. At
current levels, Dishman is trading 13.8x and 10.7x FY2011E and FY2012E
earnings, respectively. Post the correction, at current levels the stock is
factoring in all negatives. Hence, we maintain a Buy on the stock, with a
Target Price of `123.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dishman Pharmaceuticals – 3QFY2011 Result Update
Angel Broking maintains a Buy on Dishman Pharmaceuticals with a Target Price of Rs. 123.
Dishman Pharmaceuticals (Dishman) reported lower-than-expected results for
3QFY2011 impacted by the poor performance of Carbogen Amcis, currency
movement and rising material costs. On the guidance front, management
expects revenues to remain flat, margins to remain under pressure owing to
which net profit would decline in FY2011. Going forward, excluding Carbogen
Amcis, the company has guided a 15% top-line growth for FY2012. We have
lowered our estimates due to the slower-than-expected recovery in the CRAMS
segment as well as the time lag required for restructuring of Carbogen Amcis to
fructify. However, with the stock having corrected and at current levels factoring
in most of the negatives, we maintain a Buy on the stock.
Poor performance across key segments: Dishman reported net sales of `232cr
(`222cr), a single-digit growth of 4% yoy and below our estimate of `291. The
company clocked revenues of `158cr (`161cr) in the CRAMS segment, down 2%
on low pick-up on the contract research front. Gross margins dropped to 64%
(73.4%) impacted by higher material costs. OPM at 11% (23%) came lower than
our estimate impacted by the pricing pressure. Consequently, net profit declined
by a substantial 95% to `1.7cr (`33.1cr) during the quarter.
Outlook and Valuation: On the back of the slower-than-expected recovery in the
CRAMS segment and the restructuring being undertaken at Carbogen Amcis, we
have lowered our forecast for both FY2011 and FY2012. Management expects a
flat performance in FY2011 on the top-line front, with a decline in net profit as
the margins are expected to be under pressure. However, we expect net sales
and net profit to come in at `1,045cr and `77.3cr respectively, in FY2012. At
current levels, Dishman is trading 13.8x and 10.7x FY2011E and FY2012E
earnings, respectively. We maintain a Buy on the stock, with a Target Price of
`123.
Concall takeaways
Management expects revenues in FY2011 to remain flat with a de-growth
expected at the bottom-line. For FY2012, excluding Carbogen Amcis, 15%
growth is expected on the revenue front.
Dishman remains positive about its long-term intermediate supply contract
with AstraZeneca, the contract with a Japanese company and the deal with a
US-based MNC (revenue contribution of US $5-10mn expected in FY2012).
Dishman is also the selected preferred supplier for an EU MNC for key
intermediates, which should emerge as one of the major revenue contributors
from FY2012 onwards.
Management is positive about the long-term potential through the Hipo unit in
India, which is expected to contribute from 2HFY2012.
Recommendation Rationale
Capex benefits to accrue from FY2012 onwards: Dishman is well placed to
benefit from the organic capex of Rs300cr incurred over the last three years
towards building its China and Hipo facilities and expansion of other existing
facilities at its Bavla unit targeting the European and Asian markets. Post the
new facilities getting operational, Dishman is likely to enter into long-term API
supply contracts with these players resulting in stable revenue flow going
ahead. The company’s ties with the global innovators would also strengthen
apart from reducing its dependence on Abbott.
Abbott contract back on track: Abbott has been one of Dishman’s key clients
(13% sales and 17% of operating profit in FY2010). As per a long-term
contract, Dishman primarily supplies Eprosartan (Teveten) API to the company.
Revenues from the contract have risen at a CAGR of 36.1% to Rs174.0cr over
FY2007-09 driven by increasing off-take of Eprosartan resulting in higher
margins. However, during FY2010, key products of Solvay, viz. Tricor and
Teveten de-grew on account of inventory rationalisation in the channels and
acquisition by Abbott leading to revenues of Rs120cr. With the global
inventory rationalisation likely to end and the acquisition of Solvay by Abbott
now completed, we expect the contract to normalise in FY2011.
Outlook and Valuation
On the back of the slower-than-expected recovery in the CRAMS segment and
the restructuring being undertaken at Carbogen Amcis, we have lowered our
forecast for both FY2011 and FY2012. Management expects a flat
performance in FY2011 on the top-line front, with a decline in net profit as the
margins are expected to be under pressure. However, we expect net sales and
net profit to come in at `1,045cr and `77.3cr respectively, in FY2012. At
current levels, Dishman is trading 13.8x and 10.7x FY2011E and FY2012E
earnings, respectively. Post the correction, at current levels the stock is
factoring in all negatives. Hence, we maintain a Buy on the stock, with a
Target Price of `123.
No comments:
Post a Comment