Initiating Coverage
Bilcare
Buy
Target Price: Rs339
CMP: Rs220
Upside: 54%
Technology driven growth
Bilcare is the leading provider of research based innovative packaging solutions with specialisation in pharma packaging. With the acquisition of Ineos film business in Sept’10 the client base has expanded from 600 to 2,500. The company is the global leader in pharma packaging with plants in 11 locations across the globe. Bilcare recently sold part of its GCS business for US & Europe for $61mn (Rs3.36bn). The part of the proceeds are likely to be used to retire debt. We initiate coverage on Bilcare with a target price of Rs339 (based on 3x FY14E EPS of Rs112.9).
m World leader in pharma packaging: With the acquisition of Ineos film business in Sept’10, Bilcare became the global leader in pharma packaging. The company got an entry into top pharma companies due to Ineos. Bilcare currently supplies packaging materials to the majority of global pharma companies. We expect Bilcare to benefit from Ineos amalgamation.
m Re-structuring at Ineos: Bilcare has re-structured its Ineos business by changing the raw material source from Europe to SE Asia thereby reducing cost. The company is continuously focussing on the core pharma packaging business. It is likely to install balancing equipment at Ineos facilities for increase in productivity. We expect these measures will help to improve the company’s margins.
m Promoter’s pledged shares reduced: Bilcare promoters have reduced the pledged shares from 95.3% to 9.3% in Q2FY13. They have plans to de-pledge the remaining 9.3% shares in FY13.
m Likely to benefit from $170bn patent expiry: Bilcare is likely to benefit from $170bn (Rs9,350bn) patent expiry opportunity up to 2015. The company supplies low cost blister packing materials for generic products compared to plastic bottles used currently. We expect good off-take of packaging materials for generic products.
m Initiate coverage with a Buy rating: At the CMP of Rs220, the stock trades at 3.0x FY13E EPS of Rs72.5 and 1.9x FY14E EPS of Rs112.9. We expect the company to perform well on the global front due to cost rationalisation measures at Ineos. We initiate coverage on Bilcare with a Buy rating and target price of Rs339 based on 3x FY14E earnings of Rs112.9 giving 54% upside over CMP.
m Re-structuring at Ineos: Bilcare has re-structured its Ineos business by changing the raw material source from Europe to SE Asia thereby reducing cost. The company is continuously focussing on the core pharma packaging business. It is likely to install balancing equipment at Ineos facilities for increase in productivity. We expect these measures will help to improve the company’s margins.
m Promoter’s pledged shares reduced: Bilcare promoters have reduced the pledged shares from 95.3% to 9.3% in Q2FY13. They have plans to de-pledge the remaining 9.3% shares in FY13.
m Likely to benefit from $170bn patent expiry: Bilcare is likely to benefit from $170bn (Rs9,350bn) patent expiry opportunity up to 2015. The company supplies low cost blister packing materials for generic products compared to plastic bottles used currently. We expect good off-take of packaging materials for generic products.
m Initiate coverage with a Buy rating: At the CMP of Rs220, the stock trades at 3.0x FY13E EPS of Rs72.5 and 1.9x FY14E EPS of Rs112.9. We expect the company to perform well on the global front due to cost rationalisation measures at Ineos. We initiate coverage on Bilcare with a Buy rating and target price of Rs339 based on 3x FY14E earnings of Rs112.9 giving 54% upside over CMP.
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