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Elder Pharmaceuticals -Niche products to hold the key…
Elder Pharmaceuticals’ results are not comparable as it increased its
stake in Bulgaria based Biomeda and UK based NeutraHealth during the
quarter. Total sales grew 39.8% YoY to | 251.5 crore above our
expectation of | 216 crore. Combined sales of Biomeda and
NeutraHealth stood at | 41.9 crore during the quarter. Excluding sales of
Biomeda and NeutraHealth, the base business grew 16.5% to | 209.6
crore. EBITDA margins declined 235 bps YoY to 17.8% due to a change
in the product mix and lower realisation from anti-infectives. Net profit
grew only 3% to | 15.83 crore on the back of an increase in depreciation
and interest costs. We recommend a BUY rating on the stock based on
our FY12E valuation that will be driven by new launches, optimum
capacity utilisation and consolidation of subsidiary accounts.
Highlights of quarter
During the quarter, the company, through its wholly owned subsidiary
Elder International FZCO, increased its stake in Elder Biomeda from 61%
to 92.2%. Also, it completed the acquisition of NeutraHealth for £12.2
million (entire stake). The company’s API manufacturing plant at
Patalganga received Ministry of Health’s (Japan) approval. Elder launched
Shelcal K in the domestic market during the quarter. It filed a PCT patent
for one of the advanced intermediates for the Japanese market.
Valuation
Elder Pharmaceuticals is currently trading at 8x FY12E EPS of | 45. We
expect sales and PAT to grow at a CAGR of 32% and 37% in FY10-12E
driven by 1) new product launches and incremental capacity utilisation at
the Langa Road facility, 2) acceleration of growth momentum by its
existing leading brands such as Shelcal group, Eldervit, etc. and 3)
consolidation of UK-based NeutraHealth and Bulgaria based Biomeda. We
believe the company is well poised to achieve the growth targets thanks
to its focus on niche categories such as women’s healthcare,
neutraceuticals and pain managements and selective launches of inlicensed
products. On the flip side, we see some pressure on margins due
to European consolidations. We have valued Elder at | 405, based on 9x
FY12E EPS of | 45. We recommend a BUY rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Elder Pharmaceuticals -Niche products to hold the key…
Elder Pharmaceuticals’ results are not comparable as it increased its
stake in Bulgaria based Biomeda and UK based NeutraHealth during the
quarter. Total sales grew 39.8% YoY to | 251.5 crore above our
expectation of | 216 crore. Combined sales of Biomeda and
NeutraHealth stood at | 41.9 crore during the quarter. Excluding sales of
Biomeda and NeutraHealth, the base business grew 16.5% to | 209.6
crore. EBITDA margins declined 235 bps YoY to 17.8% due to a change
in the product mix and lower realisation from anti-infectives. Net profit
grew only 3% to | 15.83 crore on the back of an increase in depreciation
and interest costs. We recommend a BUY rating on the stock based on
our FY12E valuation that will be driven by new launches, optimum
capacity utilisation and consolidation of subsidiary accounts.
Highlights of quarter
During the quarter, the company, through its wholly owned subsidiary
Elder International FZCO, increased its stake in Elder Biomeda from 61%
to 92.2%. Also, it completed the acquisition of NeutraHealth for £12.2
million (entire stake). The company’s API manufacturing plant at
Patalganga received Ministry of Health’s (Japan) approval. Elder launched
Shelcal K in the domestic market during the quarter. It filed a PCT patent
for one of the advanced intermediates for the Japanese market.
Valuation
Elder Pharmaceuticals is currently trading at 8x FY12E EPS of | 45. We
expect sales and PAT to grow at a CAGR of 32% and 37% in FY10-12E
driven by 1) new product launches and incremental capacity utilisation at
the Langa Road facility, 2) acceleration of growth momentum by its
existing leading brands such as Shelcal group, Eldervit, etc. and 3)
consolidation of UK-based NeutraHealth and Bulgaria based Biomeda. We
believe the company is well poised to achieve the growth targets thanks
to its focus on niche categories such as women’s healthcare,
neutraceuticals and pain managements and selective launches of inlicensed
products. On the flip side, we see some pressure on margins due
to European consolidations. We have valued Elder at | 405, based on 9x
FY12E EPS of | 45. We recommend a BUY rating on the stock.
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