For 3QFY2013, Indoco Remedies (Indoco)’s revenues as well as net profit were
lower than expected. The company posted a sales growth of 6.0% yoy, while the
net profit growth came in lower than expected, de-growing by 10.7% yoy. This
was mainly on account of lower-than-expected sales. The OPM was resultantly
impacted, which came in at 10.8%. While FY2013 has witnessed an overall lower
sales growth, FY2014 is likely to witness a robust growth, both on the back of
exports and domestic formulations. We recommend Buy with a revised target price
of `78.
Results lower than expected: Indoco reported net sales of `150cr (`142cr in
3QFY2012), up 6.0% yoy, but lower than our expectation of `185cr for
3QFY2013. The growth for the quarter came in mainly on the back of domestic
business, which grew by 8.8% yoy. The domestic formulations grew by 11.0% yoy.
The gross margin came in at 57.8%, ie higher than our expectations. Also, the
OPM came in at 10.8%, below our expectations of 16.4%, and contracting by
214bp on a yoy basis, mainly on back of lower sales during the quarter.
Consequently, the net profit for the quarter came in at `7.0cr, 60.0% below our
estimate of `18cr.
Outlook and valuation: We expect net sales to post a 17.4% CAGR to `784cr and
EPS to post a 24.8% CAGR to `7.8 over FY2012-14E. At `62, the stock is trading
at 10.8x and 7.9x FY2013E and FY2014E earnings, respectively. We recommend
Buy on the stock with a revised target price of `78.
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