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T e p i d g r o w t h , M a r g i n p r e s s u r e …
Unichem Laboratories’ Q1FY12 numbers were below our expectations.
Standalone revenues grew by 1% YoY to | 188.7 crore below our
expectation of | 198 crore due to de-growth in both domestic formulation
& API businesses. EBITDA margins sharply declined by ~1450 bps to
14.3% due to 1) decline in the high margin domestic formulation
business, 2) increase in overheads on account of new addition of ~600
medical representatives, and 3) commissioning of new manufacturing
facilities at Baddi and Sikkim. Net profit declined by 53% YoY to | 18.6
crore. We are reducing the target price by ~19% as the company is still
languishing under margin pressure on the top of tepid domestic growth.
ƒ Domestic formulation sales continued to affect
The domestic formulation business declined by 5% to | 139.2 crore
mainly due to inventory correction in the distributor channel.
Around 66% of domestic formulation business comes from
distributor’s channel and remaining 34% come from C&F agents. To
avoid tax related issues when GST roll out takes place, the company
started inventory correction in its distribution channel. It is in the
process of decreasing inventory in the distribution channel from 60
to 25-30 days. The company also witnessed de-growth in its acute
portfolio. As per IMS, its leading brand Ampxin group witnessed
de-growth of 21% YoY.
ƒ Subsidiaries continued to post loss
During the quarter, Niche Generics, the 100% UK Subsidiary
recorded sales of £ 2.62 Million and net loss of £ 0.11 million.
Unichem Pharmaceuticals USA Inc., the 100% US Subsidiary
recorded sales of US$ 0.7 million and net loss of US$ 0.35 million.
V a l u a t i o n
We have cut our EPS estimates for FY12/FY13 by 12.7% and 10.7%,
respectively. The stock is currently trading at ~12x FY12E EPS of | 12.3
and ~9x FY13E EPS of |15.8. We have revised our target price downward
(by reducing multiple by one notch) on account of inventory
rationalisation and margin pressure for the next 1-2 quarters. We have
ascertained a price target of |158, based on 10x FY13E EPS of |15.8.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
T e p i d g r o w t h , M a r g i n p r e s s u r e …
Unichem Laboratories’ Q1FY12 numbers were below our expectations.
Standalone revenues grew by 1% YoY to | 188.7 crore below our
expectation of | 198 crore due to de-growth in both domestic formulation
& API businesses. EBITDA margins sharply declined by ~1450 bps to
14.3% due to 1) decline in the high margin domestic formulation
business, 2) increase in overheads on account of new addition of ~600
medical representatives, and 3) commissioning of new manufacturing
facilities at Baddi and Sikkim. Net profit declined by 53% YoY to | 18.6
crore. We are reducing the target price by ~19% as the company is still
languishing under margin pressure on the top of tepid domestic growth.
ƒ Domestic formulation sales continued to affect
The domestic formulation business declined by 5% to | 139.2 crore
mainly due to inventory correction in the distributor channel.
Around 66% of domestic formulation business comes from
distributor’s channel and remaining 34% come from C&F agents. To
avoid tax related issues when GST roll out takes place, the company
started inventory correction in its distribution channel. It is in the
process of decreasing inventory in the distribution channel from 60
to 25-30 days. The company also witnessed de-growth in its acute
portfolio. As per IMS, its leading brand Ampxin group witnessed
de-growth of 21% YoY.
ƒ Subsidiaries continued to post loss
During the quarter, Niche Generics, the 100% UK Subsidiary
recorded sales of £ 2.62 Million and net loss of £ 0.11 million.
Unichem Pharmaceuticals USA Inc., the 100% US Subsidiary
recorded sales of US$ 0.7 million and net loss of US$ 0.35 million.
V a l u a t i o n
We have cut our EPS estimates for FY12/FY13 by 12.7% and 10.7%,
respectively. The stock is currently trading at ~12x FY12E EPS of | 12.3
and ~9x FY13E EPS of |15.8. We have revised our target price downward
(by reducing multiple by one notch) on account of inventory
rationalisation and margin pressure for the next 1-2 quarters. We have
ascertained a price target of |158, based on 10x FY13E EPS of |15.8.
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