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Dishman Pharma & chemicals (DISH)
Pharmaceuticals
Higher EBITDA margin helps PAT outperformance; sustainability key issue. PAT
excluding forex gain of Rs81 mn was Rs115 mn, up 8% qoq and 13% above our
estimate. This was due to higher margin on account of superior gross margin while all
other costs were up qoq, largely in line with our estimate. Gross margin expansion is
likely on account of a favorable product mix in the CRAMS segment as key segment
sales have dipped qoq in Dollar terms. We retain our negative outlook as we remain
concerned due to (1) addition in fixed assets of Rs1 bn in 1HFY12 despite poor capacity
utilization, (2) net debt/EBITDA at 5X (9MFY12), (3) interest cost constitutes 30% of
EBITDA, and (4) lack of clarity on disinvestment in the Chinese facility. Maintain
REDUCE (unchanged) with a target price of Rs60 (7X FY2013E EPS).
Sales at Rs2.6 bn, 3% below our estimate
Sales increased 15% yoy and were flat qoq to touch Rs2.6 bn this quarter. While sales were only
3% below our estimate, we remain disappointed with no sequential pick-up seen in the core
CRAMS business from India and Carbogen Amcis. The CRAMS business from India was in fact
down yoy in Dollar terms, 7% lower than our estimate. Carbogen Amcis sales fell qoq in Dollar
terms to US$20 mn, in line with our estimate. In the MM segment, (1) the Vitamin D business
reported sales of Euro7 mn versus our estimate of Euro6 mn while (2) the India business registered
sales of US$9 mn, lower than our estimate of US$10 mn.
EBITDA excluding forex gain was 5.7% higher than our estimate
EBITDA (adjusted for forex gain of Rs81.3 mn as earlier forex losses were reversed; we were
expecting loss of Rs396 mn) was at Rs526 mn, 5.7% higher than our estimate resulting in margin
of 19.8%, 160 bps higher than our estimate. While other expenses and staff costs were both
3-4% higher than our estimate, higher gross margin was the main reason for higher EBITDA
margin. Gross margin shot up 400 bps qoq to 68%, implying the product mix was better this
quarter. In light of (1) no sequential pick-up in sales and (2) no sequential drop in staff costs and
other expenses, we think this gross margin expansion is not sustainable.
We increase our FY2013E PAT excluding forex by 2%
PAT excluding forex has ranged between Rs105 mn and Rs115 mn in 9MFY12. We estimate PAT
at Rs156 mn in 4QFY12E and Rs487 mn in FY2012E (excluding forex), in line with the
management guidance. In FY2012E, we expect sales in Dollar terms to remain flat yoy and EBITDA
margin to improve 200 bps due to cost-cutting measures. We factor in recovery in sales and
estimate largely flat margin in FY2013E with interest cost and tax rate inching up. However, we
remain concerned as sustainability of sales growth in the core businesses of CRAMS from India
and Carbogen Amcis remains an issue—any evidence to nullify our concern has not been seen
YTD. We would like to see sustainable sales growth before turning positive.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dishman Pharma & chemicals (DISH)
Pharmaceuticals
Higher EBITDA margin helps PAT outperformance; sustainability key issue. PAT
excluding forex gain of Rs81 mn was Rs115 mn, up 8% qoq and 13% above our
estimate. This was due to higher margin on account of superior gross margin while all
other costs were up qoq, largely in line with our estimate. Gross margin expansion is
likely on account of a favorable product mix in the CRAMS segment as key segment
sales have dipped qoq in Dollar terms. We retain our negative outlook as we remain
concerned due to (1) addition in fixed assets of Rs1 bn in 1HFY12 despite poor capacity
utilization, (2) net debt/EBITDA at 5X (9MFY12), (3) interest cost constitutes 30% of
EBITDA, and (4) lack of clarity on disinvestment in the Chinese facility. Maintain
REDUCE (unchanged) with a target price of Rs60 (7X FY2013E EPS).
Sales at Rs2.6 bn, 3% below our estimate
Sales increased 15% yoy and were flat qoq to touch Rs2.6 bn this quarter. While sales were only
3% below our estimate, we remain disappointed with no sequential pick-up seen in the core
CRAMS business from India and Carbogen Amcis. The CRAMS business from India was in fact
down yoy in Dollar terms, 7% lower than our estimate. Carbogen Amcis sales fell qoq in Dollar
terms to US$20 mn, in line with our estimate. In the MM segment, (1) the Vitamin D business
reported sales of Euro7 mn versus our estimate of Euro6 mn while (2) the India business registered
sales of US$9 mn, lower than our estimate of US$10 mn.
EBITDA excluding forex gain was 5.7% higher than our estimate
EBITDA (adjusted for forex gain of Rs81.3 mn as earlier forex losses were reversed; we were
expecting loss of Rs396 mn) was at Rs526 mn, 5.7% higher than our estimate resulting in margin
of 19.8%, 160 bps higher than our estimate. While other expenses and staff costs were both
3-4% higher than our estimate, higher gross margin was the main reason for higher EBITDA
margin. Gross margin shot up 400 bps qoq to 68%, implying the product mix was better this
quarter. In light of (1) no sequential pick-up in sales and (2) no sequential drop in staff costs and
other expenses, we think this gross margin expansion is not sustainable.
We increase our FY2013E PAT excluding forex by 2%
PAT excluding forex has ranged between Rs105 mn and Rs115 mn in 9MFY12. We estimate PAT
at Rs156 mn in 4QFY12E and Rs487 mn in FY2012E (excluding forex), in line with the
management guidance. In FY2012E, we expect sales in Dollar terms to remain flat yoy and EBITDA
margin to improve 200 bps due to cost-cutting measures. We factor in recovery in sales and
estimate largely flat margin in FY2013E with interest cost and tax rate inching up. However, we
remain concerned as sustainability of sales growth in the core businesses of CRAMS from India
and Carbogen Amcis remains an issue—any evidence to nullify our concern has not been seen
YTD. We would like to see sustainable sales growth before turning positive.
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