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India Equity Research Reports, IPO and Stock News
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RECO : BUY TP : Rs265
Investment Rationale
§ We maintain our positive stance on the company given its business transformation on account of favorable
product mix, increase in capacity utilization, supply agreement with Pfizer and foray into high margin niche
segments of oral contraceptives, controlled substances and injectables.
§ Expect contribution of formulations to increase from 10% in FY05 to 54% in FY12E.
§ Pfizer and other MNCs are set to drive the growth of formulation portfolio. We expect Pfizer to further expand
the scope of the deal to more products. Tie-ups with other MNCs will bring fresh upside to the stock.
§ Balance sheet concerns are fading away as the company is expected to generate good cash flows on account
of increased profitability and peak investment cycle tapering off. The debt to equity is expected to decrease
from 1.1x in FY10 to 0.8x in FY12E.
Risk & Concern
§ Import alert ban imposed by USFDA on the company unit IV & unit VI will create an overhang on the stock.
Valuations
§ We expect earnings to grow at 14% CAGR over FY10-12E.
§ At CMP, the stock is trading at 9.6x FY12E EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RECO : BUY TP : Rs265
Investment Rationale
§ We maintain our positive stance on the company given its business transformation on account of favorable
product mix, increase in capacity utilization, supply agreement with Pfizer and foray into high margin niche
segments of oral contraceptives, controlled substances and injectables.
§ Expect contribution of formulations to increase from 10% in FY05 to 54% in FY12E.
§ Pfizer and other MNCs are set to drive the growth of formulation portfolio. We expect Pfizer to further expand
the scope of the deal to more products. Tie-ups with other MNCs will bring fresh upside to the stock.
§ Balance sheet concerns are fading away as the company is expected to generate good cash flows on account
of increased profitability and peak investment cycle tapering off. The debt to equity is expected to decrease
from 1.1x in FY10 to 0.8x in FY12E.
Risk & Concern
§ Import alert ban imposed by USFDA on the company unit IV & unit VI will create an overhang on the stock.
Valuations
§ We expect earnings to grow at 14% CAGR over FY10-12E.
§ At CMP, the stock is trading at 9.6x FY12E EPS.
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