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DISH’s PAT performance during the Mar12 quarter, stood its best since the Dec09 quarter, with flattish revenues on a reasonably large base and expansion in operating margins. The MM business fell 14% during the quarter, nevertheless clocking in a third of annual revenues, courtesy increased Vitamin D3 sales. On a series of pipeline projects, the management appears confident of delivering growth; FY13f budgeted sales target stands at INR1.25bn, and a PAT target of INR1bn. After bouncing a few assets in and out of plans, the volatility in deciding their viability may put investors at a discomfort. However, valuations look compellingly reasonable and operating leverage can propel a surprise. We rollover our TP to Mar13 and lower it to INR52; upgrade to Add.
Revenue growth on noticeable base, PAT highest since Dec09
DISH reported a 2% revenue growth during the Mar12 quarter (unaudited numbers) on a reasonably large base of Mar11. Revenue from the CRAMS segment rose 14% y‐o‐y, a combination of a decline at Carbogen Amcis (CA) on the one hand, set off by a sharp growth in domestic operations on the other. The MM business fell 14% during the quarter, nevertheless clocking in a third of annual revenues, courtesy the increased Vitamin D3 sales on a shortage situation globally, according to the management. The fickle nature of the opportunity is thus difficult to ignore. PAT at INR313mn during the quarter stood its best since the Dec09 quarter.
Company remains optimistic on project line ups, execution is key
Across businesses, DISH remains optimistic on its project pipeline. The HiPo plant, for example, has been audited by various MNCs and revenues are expected to tick in. With Eisai Co Ltd (4523 JP, NR), CA is developing a prostrate cancer molecule, currently in an advanced phase of development. According to the company, an EU‐based disinfectant major is in talks with the company to form a JV, possibly extending into a stake sale at a future date. While the euphoria is being sounded, execution is yet to be seen.
Backtracking on asset use hampers confidence…
Over the last 12 months, DISH has gone back and forth on its plans for its Chinese unit. The USD20mn asset was facing problems in securing local regulatory approvals and the company decided to put the unit on the block. Now, in the absence of a buyer plans of bringing the plant back to operations have revived. A SEZ into which DISH invested is also now being planned to be de‐notified. The volatility in deciding the viability and mere existence of assets is likely to stroke discomfort among investors.
… but operating leverage could propel surprise; upgrade to Add
At 5.6x/4.2x the FY13f/FY14f EPS, valuations seem compellingly reasonable. Operating leverage can propel a surprise, and a stronger‐than‐estimated revenue growth could have a disproportionate positive impact on earnings. We rollover our TP to Mar13 and lower it to INR52; upgrade to Add. Lower‐than‐estimated sales from India CRAMS and CA are a risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DISH’s PAT performance during the Mar12 quarter, stood its best since the Dec09 quarter, with flattish revenues on a reasonably large base and expansion in operating margins. The MM business fell 14% during the quarter, nevertheless clocking in a third of annual revenues, courtesy increased Vitamin D3 sales. On a series of pipeline projects, the management appears confident of delivering growth; FY13f budgeted sales target stands at INR1.25bn, and a PAT target of INR1bn. After bouncing a few assets in and out of plans, the volatility in deciding their viability may put investors at a discomfort. However, valuations look compellingly reasonable and operating leverage can propel a surprise. We rollover our TP to Mar13 and lower it to INR52; upgrade to Add.
Revenue growth on noticeable base, PAT highest since Dec09
DISH reported a 2% revenue growth during the Mar12 quarter (unaudited numbers) on a reasonably large base of Mar11. Revenue from the CRAMS segment rose 14% y‐o‐y, a combination of a decline at Carbogen Amcis (CA) on the one hand, set off by a sharp growth in domestic operations on the other. The MM business fell 14% during the quarter, nevertheless clocking in a third of annual revenues, courtesy the increased Vitamin D3 sales on a shortage situation globally, according to the management. The fickle nature of the opportunity is thus difficult to ignore. PAT at INR313mn during the quarter stood its best since the Dec09 quarter.
Company remains optimistic on project line ups, execution is key
Across businesses, DISH remains optimistic on its project pipeline. The HiPo plant, for example, has been audited by various MNCs and revenues are expected to tick in. With Eisai Co Ltd (4523 JP, NR), CA is developing a prostrate cancer molecule, currently in an advanced phase of development. According to the company, an EU‐based disinfectant major is in talks with the company to form a JV, possibly extending into a stake sale at a future date. While the euphoria is being sounded, execution is yet to be seen.
Backtracking on asset use hampers confidence…
Over the last 12 months, DISH has gone back and forth on its plans for its Chinese unit. The USD20mn asset was facing problems in securing local regulatory approvals and the company decided to put the unit on the block. Now, in the absence of a buyer plans of bringing the plant back to operations have revived. A SEZ into which DISH invested is also now being planned to be de‐notified. The volatility in deciding the viability and mere existence of assets is likely to stroke discomfort among investors.
… but operating leverage could propel surprise; upgrade to Add
At 5.6x/4.2x the FY13f/FY14f EPS, valuations seem compellingly reasonable. Operating leverage can propel a surprise, and a stronger‐than‐estimated revenue growth could have a disproportionate positive impact on earnings. We rollover our TP to Mar13 and lower it to INR52; upgrade to Add. Lower‐than‐estimated sales from India CRAMS and CA are a risk.
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