Recovery of Carbogen Amcis
Dishman Pharma’s (DPCL) revenues and EBIDTA for Q4FY13 were in line with our expectation. However, net profit was below our estmates. The company reported a decline of 0.5%YoY in revenues, 200bps in EBIDTA margin and 41%YoY in net profit. Revenues in CRAMS business declined by 0.5%YoY and in others by 2.9%YoY. DPCL incurred forex loss of Rs184mn which was included in other expenses. Tax rate was higher at 59.1% of PBT as it included deferred tax of Rs90mn. Carbogen Amcis (CA) reported a growth of 4% during the quarter and 20% in FY13. The management has given a guidance of 10-12% sales growth for FY14. We have a Buy rating for the scrip with a revised target price of Rs130 from Rs125 (based on 8x Sept’14 EPS of Rs16.3).
Flat sales growth: DPCL reported 0.5%YoY decline in revenues from Rs3.50bn to Rs3.48bn in Q4FY13. CRAMS revenues (63% of total) declined by 0.5%YoY from Rs2.20bn to Rs2.19bn. Its other businesses (37% of total) declined by 3%YoY from Rs1.30bn to Rs1.27bn. CA (34% of total) reported 4%YoY growth from Rs1.15bn to Rs1.20bn. Sales of Vitamin D3 business (15% of total) declined by 31%YoY from Rs751mn to Rs516mn as the Netherlands plant was under renovation.
Margin declines: DPCL’s EBIDTA margin for Q4FY13 dropped by 200bps from 23.5% to 21.5% due to the increase in personnel cost and other expenses. The company’s material cost declined by 690bps from 34.6% to 27.7% due to the change in product mix. Personnel cost increased by 270bps from 22.9% to 25.6% due to flat sales growth. Other expenses went up by 630bps from 18.9% to 25.2%.
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Dishman Pharma’s (DPCL) revenues and EBIDTA for Q4FY13 were in line with our expectation. However, net profit was below our estmates. The company reported a decline of 0.5%YoY in revenues, 200bps in EBIDTA margin and 41%YoY in net profit. Revenues in CRAMS business declined by 0.5%YoY and in others by 2.9%YoY. DPCL incurred forex loss of Rs184mn which was included in other expenses. Tax rate was higher at 59.1% of PBT as it included deferred tax of Rs90mn. Carbogen Amcis (CA) reported a growth of 4% during the quarter and 20% in FY13. The management has given a guidance of 10-12% sales growth for FY14. We have a Buy rating for the scrip with a revised target price of Rs130 from Rs125 (based on 8x Sept’14 EPS of Rs16.3).
Flat sales growth: DPCL reported 0.5%YoY decline in revenues from Rs3.50bn to Rs3.48bn in Q4FY13. CRAMS revenues (63% of total) declined by 0.5%YoY from Rs2.20bn to Rs2.19bn. Its other businesses (37% of total) declined by 3%YoY from Rs1.30bn to Rs1.27bn. CA (34% of total) reported 4%YoY growth from Rs1.15bn to Rs1.20bn. Sales of Vitamin D3 business (15% of total) declined by 31%YoY from Rs751mn to Rs516mn as the Netherlands plant was under renovation.
Margin declines: DPCL’s EBIDTA margin for Q4FY13 dropped by 200bps from 23.5% to 21.5% due to the increase in personnel cost and other expenses. The company’s material cost declined by 690bps from 34.6% to 27.7% due to the change in product mix. Personnel cost increased by 270bps from 22.9% to 25.6% due to flat sales growth. Other expenses went up by 630bps from 18.9% to 25.2%.
Carbogen Amcis turns around: CA has reported 20%YoY growth for FY13 from Rs3.97bn to Rs4.77bn. Its EBIDTA margin has also improved from 7.7% to 16.4% during the year. We expect CA to drive future growth of the company.
Hipo facility expands: DPCL has orders of $10-15mn for FY14 from Novartis, Merck, Astra Zeneca for anti-cancer products from this unit. Currently, the company operates two modules. DPCL is increasing capacity by adding two more modules, which will be operational in FY14. The anti-cancer business is expected to drive future growth of the company.
Generic business starts: The company has filed 5 DMFs with US FDA and has 7-8 DMFs ready for filing. The management expects $10mn (Rs550mn) revenues from this business in FY14.
Valuations: We expect DPCL to benefit from the good growth in CA and Vitamin D3 businesses. The generic product pipeline for the US market will deliver consistent growth. At the CMP of Rs70, the stock trades at 4.7x FY14E EPS of Rs14.8 and 4.0x FY15E EPS of Rs17.7. We have revised our FY14 and FY15 estimates downwards by 6% and 15% respectively. We have a Buy rating for the scrip with a revised target price of Rs130 (based on 8x Sept’14 EPS of Rs16.3) with an upside of 85.4% over the CMP.
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