Dishman Pharmaceuticals Ltd - Margins Disappoint; Result Update Q3FY15 :: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

Dishman Pharma - Margins Disappoint; Result Update Q2FY15 :: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

Recovery of Carbogen Amcis Dishman Pharma :Centrum

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%.

Management Interaction and Estimates Revision for Dishman Pharma:: Centrum

Management Interaction and Estimates Revision

Dishman Pharma

Buy

Target Price: Rs168

CMP: Rs119         

Upside: 41%

Marked performance improvement

We interacted with the management of Dishman Pharmaceuticals & Chemicals (DPCL) and are impressed with the latest developments. The company recently entered into generic API business and filed 20DMFs with US FDA. Its vitamin D and Quats businesses are doing well. DPCL is in the final stage of negotiation for the sale of its SEZ land. The company is likely to reduce debt from the proceeds of this land sale.  We re-iterate a Buy rating and target price of Rs168 based on 8x FY14 earnings.

m  Generic API to stabilse revenues: DPCL recently entered into generic API business and filed 20 DMFs with US FDA. The company has identified 35 products and users for these products. We expect revenues of $10mn (Rs550mn) in FY14 and $13mn (Rs715mn) in FY15 from this business. In future, the generic business is expected to minimise the volatility of the company’s earnings.
m  Vitamin D3 and Quats to drive growth: DPCL generates ~20% of its revenues from vitamin D3 business. With the Bawla facility recently going on stream, we expect margin improvement due to integration of Indian and Netherland businesses. The company supplies high margin benzathonium chloride (Quats) to MNCs for their hospital disinfectant business. The Quats business is also likely to drive future growth.
m  Carbogen Amcis turns around: DPCL’s 100% subsidiary Carbogen Amcis (CA) reported 1,080bps improvement in margin in Q2FY13 from 7.2% to 18.0%. We expect CA margin to improve further due to the increase in CRAMS business and rationalisation of its orders.
m  SEZ land sale to reduce debt: DPCL is in the final round of negotiations with three parties for the sale of its SEZ land. The company is likely to receive Rs500mn in FY13 as part payment and Rs500mn plus profit of Rs100-150mn in FY14. The management has indicated that the amount will be used to reduce debt.
m  Re-iterate a Buy rating: At the CMP of Rs119, the stock trades at 9.2x FY13E EPS of Rs13.0 and 5.7x FY14E EPS of Rs21.0. We expect the company to maintain strong growth in CA, Vitamin D and Quats businesses. We have revised our EPS estimates for FY13 and FY14 upwards by 18% and 46%. We re-iterate a Buy rating for DPCL with the target price of Rs168 based on 8x FY14E earnings of Rs21.0 with an upside of 41% over CMP.

Thanks & Regards, 

-- 

Strong margin improvement Dishman Pharma :: Centrum

Strong margin improvement
Dishman Pharma & Chemicals (DPCL) results for Q2FY13 were lower than our
expectations. The company reported 12%YoY growth in revenues, 580bps
improvement in EBIDTA margin and strong growth in net profit. The
company’s EBIDTA margin improved due to the 830bps YoY reduction in
material cost. The company has resumed the supply of Eprosartan Mesylate
(EM) API to Abbott in Q2FY13. DPCL has commenced generic API business to
reduce quarterly fluctuation in revenues. We have revised our EPS estimates
upwards by 11% and 12% for FY13 and FY14 respectively. We have a Buy
rating for the scrip with a revised target price of Rs113 (based on 7x FY14E
EPS).
Moderate revenue growth: DPCL reported 12%YoY growth in revenues from Rs2.65bn
to Rs2.97bn. The CRAMS segment (65% of revenues) grew by 12%YoY from Rs1.69bn to
Rs1.88bn. The others segment (35% of revenues) was flat at Rs1.00bn. The PBIT margin
of CRAMS improved from 5.5% to 11.9%YoY whereas for the others segment it
improved from 15.3% to 24.2%YoY.
Excellent margin improvement: DPCL’s EBIDTA margin improved by 580bpsYoY from
16.4% to 22.2% due to the decline in material cost. Material cost declined by 830bps
from 37.5% to 29.2% of revenues due to higher growth of CRAMS. Personnel expenses
increased by 220bpsYoY from 26.3% to 28.5% due to the new recruitments for the
generic API business.

LKP BYTES : Buy DISHMAN @96 with a target of 160

The story so far ………..

After its IPO in 2004, Dishman Pharmaceuticals took a leap into CRAMS with its $75mn acquisition of the Swiss CMO- Carbogen Amcis in 2006. It consolidated its position by taking over the Vitamin and Chemical business of Solvay in Netherlands and in 2010 set up one of the World's largest High Potency API facility at Bavla in Ahmedabad.

FY'12 performance was impacted due to its aggressive debt raising for huge capex which pushed gearing levels to 0.9x and Dishman reported a net profit of 57crs on revenues of 1125crs. CRAMS form 65% of revenues with Carbogen and Abbott business accounting for over 50% and 15% respectively. The balance 35% share comes from Marketable Molecules and Vitamin D ( Dishman is one of the world's largest producer of Vitamin D3)

Investment Focus - Dishman Pharma: Buy : Business Line

technicals: M & M, Chennai Petro, United Spirits, Dishman Pharma, Wire & Wireless, NHPC, :: Business Line

Dishman Pharma & Chemicals:Treading Cautiously :Karvy

Treading Cautiously
Dishman Pharmaceuticals & Chemicals (Dishman Pharma) is quite upbeat
for FY13E with several of the Company’s business engines gradually
falling in place. The commencement of Vitamin D3, Disinfectants and
Oncology unit would add to the additional revenues streams. Renewed
traction in Dishman Pharma would also aid the profitability. We upgrade
our EPS estimates and reiterate our “BUY” recommendation on the stock.

Dishman Pharmaceuticals & Chemicals Target Price (INR) 52 Confidence yet to flow, but operating leverage can deliver :: Avendus

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Angel Broking - Dishman Pharmaceuticals - RU4QFY2012 - Result Updates - PDF link

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Dishman Pharmaceuticals - RU4QFY2012

Technicals: Wockhardt, BOC, Steel Exchange, Hindalco, Dishman Pharma, Reliance Mediaworks ::Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Please discuss the medium- and long-term outlooks of Wockhardt and BOC India Ltd.

Anil Kumar Ray

Wockhardt (Rs 582.3): This stock is on steroids since the beginning of this calendar. It reversed from the trough at Rs 251 in the first week of January and did not look back thereafter. It has shattered its long-term resistance at Rs 550 and is currently trading at a new life-time high.

It is obvious that long-term up move is in progress over the last two months. But the need for caution arises from the fact that the index is close to its long-term peak. The zone between Rs 550 and Rs 600 is a potential minefield. Strong move above Rs 600 is required to signal that the stock will now go on to Rs 653. Long-term outlook will stay positive as long as the stock trades above Rs 380.

Investors with short- to medium-term view can take some money off the table and hold the rest with stop at Rs 450.

 

Dishman Pharma: Improved performance of CRAMS business :Centrum

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Improved performance of CRAMS business
Dishman Pharma (DPCL) Q3FY12 numbers were above our expectation due to
marked improvement in CRAMS business. The company’s revenues grew by
12%YoY, EBIDTA margin by 990bps and net profit by 896%YoY on a smaller
base. The management is confident of improved performance in FY13 and has
revised sales guidance from 15% to 20%. DPCL’s three manufacturing
facilities for oncology, vitamin D and disinfectant formulations at Bavla went
on stream during the quarter. These are likely to contribute significantly in
FY13. We reiterate Buy for the scrip with a revised target price of Rs92 (based
on 6x FY13 EPS).
􀂁 Lower sales growth of CRAMS business: During the quarter, DPCL’s total revenues
grew by 12%YoY from Rs2.38bn to Rs2.66bn. The company reported 7%YoY sales
growth in CRAMS from Rs1.58bn toRs1.69bn due to the fall in domestic revenues and
Synprotec, UK. However, Carbogen Amcis (CA) reported strong growth of 29%YoY from
Rs795mn to Rs1,023mn. The marketable molecule (MM) segment reported 31%YoY
sales growth from Rs736mn to Rs964mn. Vitamin D business grew by 36%YoY from
Rs375mn to Rs509mn. Revenues of other MM grew by 26% from Rs361mn to Rs455mn.
􀂁 Sharp improvement in Margin by 990bps: DPCL’s EBIDTA margin improved by
990bps from 13.2% to 23.1% due to overall reduction in costs. Material cost declined by
290bps from 35.2% to 32.3% of total revenues due to the change in product mix.
Personnel expenses were lower by 350bps from 30.6% to 27.1% due to re-structuring at
CA. Other expenses declined by 340bps from 20.9% to 17.5% due to lower marketing
cost. There was a forex gain of Rs81mn against Rs57mn. The company’s net profit
improved by 896%YoY from Rs17mn to Rs167mn on a lower base.

Dishman Pharma & chemicals: Higher EBITDA margin helps PAT outperformance; sustainability key issue :: Kotak Securities

Please Share:: 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).

Dishman Pharmaceuticals & Chemicals (DISH.BO) Mixed Bag  Citi Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Dishman Pharmaceuticals & Chemicals
(DISH.BO)
Mixed Bag
 Mixed Bag — Rising input costs & inferior product mix offset benefits of a pickup in
revenues & recurring PAT missed our estimate by c9%. While growth trends are
encouraging, profitability is yet to improve to the same extent. At 5xFY13E, valuations
are attractive - if the company is able to sustain growth & improve profitability, there
would be good scope for a re-rating.
 Growth Encouraging — Revenues at Rs2.7bn were higher than expected (Rs2.5bn).
Growth (+27% YoY) was driven by the Marketable Molecules (MM) biz (+93% YoY -
Benzethonium supplies led) & Carbogen Amcis (CA) (+12%YoY, +42%QoQ). Overall,
the CRAMS biz registered single digit growth (+5% YoY, +6% QoQ), with the India
based biz staying muted.
 EBITDA margin improves but less than expected — Sharp increase in input costs
(RM/sales: +1,063 bps YoY, +563 QoQ) & an inferior product mix (high growth in MM)
were offset by lower staff cost (-3% QoQ, CA restructuring benefit) & other expenses
(excl forex) – leading to higher EBITDA margin (17.6%, +152 bps YoY). This was
however lower than our expectation of 20%. Recurring net income (+26% YoY) was
c9% lower that expected.
 New Contracts/Initiatives Update — ) The China facility (HiPo) has been put on the
block now – delay in getting GMP certification for a foreign player like DISH could hurt
viability of the plant. DISH expects to garner cUS$25m+ & repay debt (Net D/E ~1.0);
2) Abbott contract value: US$135m over CY12-CY14 – now sole supplier of
Eprosartan; 3) CA restructuring benefits accruing now - Oct month sales & EBITDA:
c8m CHF & c1m CHF resp vs. monthly run rate of c5m CHF & 0.2m CHF in 1HFY12.
 Earnings Call Takeaways — 1) Onco facility in India has started supplying
gemcitabine & 2 more products; 2) Inventory: Rs2.9bn, Receivables: Rs1.6bn; 3) Gross
d ebt: Rs9.7bn – c70% forex debt; 4) Most subs have seen higher profitability.

Dishman Pharma :TP: INR63 : Motilal Oswal

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Dishman Pharmaceuticals and Chemicals (DISH) posted 2QFY12 performance that was lower than our estimates.
 DISH reported 2QFY12 revenue growth of 26.5% YoY to INR2.69b (against our estimate of INR2.68b), led mainly by
its Marketable Molecule (MM) business. EBITDA increased by 27.4% YoY to INR471m (against our estimate of
INR543m) and DISH reported a net loss of INR64m (against our profit estimate of INR171m) impacted by poor
operational performance coupled with increased interest and depreciation expenses and INR187m of forex losses.
 Top-line growth was led by the MM segment, which posted strong revenue growth of 93% YoY to INR1b. CRAMS
revenue reported muted growth of 5% YoY to INR1.69b (63% contribution to revenue) led by a 16% YoY growth in
Carbogen AMCIS (CA) revenue to INR1.06b.
 EBITDA increased by 27.4% YoY to INR471m (against our estimate of INR543m) led by healthy top-line growth.
Overall EBITDA margins remained flat YoY at 17.5% (against our estimate of 20.3%).
 DISH reported net loss of INR64m due to poor operational performance coupled with an increase in interest and
depreciation charges and INR187m of MTM forex loss due to foreign currency debt.
Outlook and view: The macro environment for the CRAMS business remains favorable, given India's inherent cost
advantages and chemistry skills. We believe DISH's India operations will benefit from increased outsourcing from India,
given its strengthening MNC relations and expansion of some existing customer relationships. However, the adverse
business environment for CA will continue to impact earnings growth in FY12 and FY13. We expect revenue CAGR of
8.6%, EBITDA CAGR of 19.4% and earnings CAGR of -11% over FY11-13. Earnings growth will be impacted mainly by
a significant increase in tax rate (due to expiry of EoU benefits), forex losses and increase in interest costs. Based on
our revised estimates, the stock trades at 8.3x FY12E and 5.8x FY13E earnings. RoE will continue to be below 10%
until new facilities and CRAMS contracts ramp up. Maintain Neutral rating with a target price of INR63 (8x FY13E EPS).

Dishman Pharma & chemicals: Higher interest costs shave off profit ::Kotak Sec,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Dishman Pharma & chemicals (DISH)
Pharmaceuticals
Higher interest costs shave off profit. PBT excluding MTM forex loss was at Rs118
mn, down qoq and 33% lower than our estimate due to higher interest costs. While
sales and EBITDA (adjusted for forex) were in line with our estimates, we remain
concerned as (1) fixed assets are up by Rs1 bn in 1HFY12 despite poor capacity
utilization, (2) debt/equity is at 1X, (3) Interest costs constitute 32% of EBITDA, (4) no
clarity in strategy regarding Chinese investment, which is now being divested, and (5)
no pick-up seen in CRAMS business from India. We reduce our FY2012E PAT due to the
forex impact and maintain FY2013E EPS at Rs9. Maintain REDUCE with PT at Rs55 (6X
FY2013E EPS). We need to see sustainability in the core business of CRAMS from India
before turning positive and believe the Carbogen Amcis recovery might take longer due
to macro trends and exposure to pre-clinical contract research business.

Dishman Pharma : Gradual Recovery Ahead – Maintain Accumulate :Emkay

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Dishman Pharma

Gradual Recovery Ahead – Maintain Accumulate

ACCUMULATE

CMP: Rs 46                                       Target Price: Rs 53

---

n     Q2FY12 revenues at Rs2.7 bn grew by 27% YoY, Adj. EBIDTA at Rs471 mn grew by 174% YoY and APAT at Rs125mn was up 46% YoY

n     Revenue growth was mainly driven by 28% growth in MM business. Improvement in profitability was primarily due to non-cash forex loss of Rs188mn vs. gain of Rs197mn in Q2FY11

n     Going forward, commencement of supplies to Abbott for Teveten & Tricor API, commencement of Vit D plant in next month and ongoing supplies of Gemcitabine from Unit IX are key performance indicators

n     We expect gradual recovery in business with +ve contribution from all the subsidiaries, however mounting debt remains a concern. Maintain Accumulate with a target price of Rs53

Reader Query Corner: South Indian Bank, Jet Airways,Dishman Pharma, Engineers India, PFC, CanFin Homes, MTNL, GMR:: Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Please let me know the short- and medium-term targets for South Indian Bank and Jet Airways.

John

South Indian Bank (Rs 23.6): After retracing 38.2 per cent Fibonacci retracement level of the stock's prior up move from its lifetime high of Rs 29.7 in November 2010, the stock found support at around Rs 19 in February. The price band between Rs 19 and Rs 20 is a significant support band from a long-term perspective.

This support band cushioned the stock from declining further in late August this year. Building a strong base at around Rs 20, the stock resumed its long-term uptrend that has been in place ever since bottoming out in the first quarter of 2009.

The stock is presently testing a key medium-term resistance level around Rs 23.5. Emphatic breakthrough of this level will take the stock northwards to Rs 25.5-26 range in the short-term. Investors with short-term horizon can hold the stock with stop loss at Rs 22. However, a fall below Rs 22 will mar the short-term positive view and pull the stock down to Rs 20.

Strong move beyond Rs 26 will pave the way for a rally to Rs 30 in the medium-term. Investors with a medium-term perspective can consider holding the stock with stop-loss at Rs 20. On the other hand, breach of Rs 20 can drag the stock down to Rs 17 or to Rs 15 in the coming months.

Jet Airways (Rs 251.3): Ever since encountering resistance in the range between Rs 900 and Rs 925 in November 2010, Jet Airways resumed its long-term downtrend. Following a sideways consolidation phase between February and August in the band between Rs 400 and Rs 515, the stock breached southwards.

Subsequently, the stock landed at its long-term significant support at around Rs 220 in early October and is reversing upwards. The stock is currently testing its immediate short-term resistance (late August trough) at Rs 253. Decisive jump above this level will give short-term targets of Rs 285 and Rs 308.

Short-term investors can hold the stock with stop-loss at Rs 230. Medium-term investors can hold the stock with deeper stop-loss at Rs 215. Strong move beyond Rs 308 will take the stock higher to Rs 335, Rs 373 and Rs 400 in the medium-term.

Nevertheless, dive below Rs 215 will pull the stock down to Rs 178 or even further down to its long-term support at around Rs 130.

I got PFC (Power Finance Corporation) through the FPO (Follow-on Public Offer). Please advise if I can buy more shares now.

Srinivasan

PFC (Rs 155.1): In our previous review of this stock in July this year, we had mentioned that inability to move above Rs 250 will mean that the stock can head lower to Rs 150 or Rs 125 over the ensuing months. In line with our view, the stock failed to rally and declined to Rs 150 and then found support just above Rs 125, at Rs 130 in late August 2011.

The support zone between Rs 125 and Rs 130 is an important zone from a long-term perspective. The short-term trend is a sideways consolidation. Investors with higher penchant for risk can consider buying the stock with stop-loss at Rs 125. Strong penetration of resistance at Rs 170 will lift PFC higher to the Rs 215-220 range in the ensuing quarters. The next target is at Rs 250.

However, breach of Rs 125 downwards will reinforce the downtrend that has been in place from its lifetime peak of Rs 383; the stock can roll down to Rs 107 or even to Rs 86 in the long-term.

Kindly let me know the long-term prospects of CanFin Homes and MTNL.

Shantha.D. Pai

CanFin Homes (Rs 103.7): After retracing 61.8 per cent Fibonacci retracement level of the prior up move (from the October 2008 low of Rs 37.5 to August 2010 peak of Rs 172), CanFin Homes took support at its long-term support zone between Rs 85 and Rs 90 during February to August this year, and bounced upwards. Subsequent supports are at Rs 77 and Rs 67.

The stock has been on an intermediate-term downtrend from its August 2010 peak. This trend remains in place as long as the stock trades below Rs 130. Strong weekly close above this level will strengthen the stock's long-term uptrend and take the stock higher to Rs 150 and then to Rs 170. Nonetheless the stock has immediate resistance at Rs 110.

MTNL (Rs 30.9): MTNL has been on a long-term downtrend from its January 2008 peak of Rs 219. Medium- as well as short-term trends are also down for the stock. However, after recording an all-time low at Rs 29.15 on October 24, the stock found support around this level and is on the brink of reversing, triggered by positive divergence in weekly indicators. Only a strong move above Rs 37.5 will signal that the stock has bottomed out, and it can then rally to Rs 41, Rs 48 and 52.

Next significant resistance is at Rs 68. Emphatic breakthrough of long-term key resistance at Rs 90 will reverse the stock's intermediate-term downtrend and lift the stock higher to Rs 110 or Rs 124.

Conversely, inability to rally beyond Rs 37.5 will pull the stock down to Rs 29. On a breach of immediate support level at around Rs 29, will drag the stock to new lows.

I purchased GMR Infrastructure at Rs 70, and Engineers India at Rs 300. I see the prices of both the stocks going down. Could you please let me know the latest supports and resistances?

Pavan

GMR Infrastructure (Rs 27.7): Ever since peaking out in June 2009 at Rs 91, the stock resumed its long-term downtrend. Trends in all time frames are down for the stock, and it is still in the bear's grip. Nevertheless, last week the stock found support just above its long-term support level of Rs 23 (October 2008 trough), and bounced up sharply.

The stock has resistance ahead at Rs 30; a conclusive penetration of this level will take the stock northwards to Rs 34 and Rs 37. Strong rally above its long-term resistance at around Rs 45 is needed to alter its intermediate-term downtrend and take the stock higher to Rs 55-58 range.

Investors can consider switching from the stock in rallies. Tumble below Rs 23 will drag the stock down to Rs 20 and to fresh lows.

Engineers India (Rs 239.8): After peaking out in May 2010 at Rs 538, the stock has been on an intermediate-term downtrend forming lower peaks and lower troughs. In April this year, the stock resumed its downtrend after testing important long-term resistance in the band between Rs 310 and Rs 315.

Since then, it has been on a medium-term downtrend. The stock has retraced 61.8 per cent Fibonacci retracement level of its prior up move from October 2008 low of Rs 50, to its May 2010 peak. Investors with long-term perspective can hold the stock with stop-loss at Rs 215.

A reversal from current levels will face resistance at Rs 260, Rs 290 and Rs 315. Decisive breakthrough of Rs 315 will pave the way for an up move to Rs 350-360 band in the long-term; investors can take partial profits off the table at that juncture. On the other hand, fall below Rs 215 can pull the stock down to Rs 180 and then to Rs 150 levels in the ensuing months.

Please review the long-term prospect of Dishman Pharmaceuticals and Chemicals as earlier stated (May 2011).

Mukesh Kumar

Dishman Pharmaceuticals and Chemicals (Rs 53): In our review of this stock in May this year, we had mentioned that there are no signs of reversal in the stock as yet, and it is likely to breach a low at Rs 87, and decline to the 2004 low of Rs 72 or even Rs 61. Investors should have divested their holding on a decline below Rs 87.

In line with our expectation, the stock breached Rs 87 and continued to decline. It has even declined below Rs 61 to register its lifetime low at Rs 52.3 on October 28. The stock is in a longer-term downtrend. Upward reversal will encounter resistances at Rs 61, Rs 72 and Rs 87.

Dynamic move above Rs 87 will take the stock higher to Rs 110 or Rs 120. Failure to surpass Rs 87 will reinforce the downtrend. Investors can make use of rally to switch out of the stock. Only on a strong close above Rs 250 will reverse the long-term downtrend.

Dishman Pharmaceuticals & Chemicals:: Profitability continues to bleed :: Target Price (Rs): 71:: KRChoksey,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Profitability continues to bleed HOLD
Dishman Pharmaceuticals Ltd (DPL) reported weak numbers during the quarter with Topline
showing a growth of 14% y-o-y & decline of 30% q-o-q. The growth was mainly led by
marketable molecule segment which grew by 33%. No improvement could be seen at
Carbogen Amcis & it still continues to make losses which declined by 21% y-o-y & 24% q-oq
and stood at Rs 74cr. CRAMS business grew by 11% y-o-y & posted revenues of Rs 158cr
y-o-y.
At the Operating level, EBITDA stood at Rs 50cr, a decline of 11% y-o-y and 15% q-o-q.
operating margins stood at 20.4%, expansion of 370bps q-o-q & contraction of 570bps y-oy.
The expansion was mainly due to change in the product mix as compared to previous
quarter. Some contribution also came in from high margin Benzethonium chloride.
Reported net profit for Q1FY12 stood at Rs 15cr, a decline of 49% y-o-y & 31% q-o-q.
Profitability was mainly hit due to higher interest expense which grew by 27% q-o-q & 75%
y-o-y. NPM declined by 740bps & stood at 6% in contrast to 13.4% last year.
Operating Performance:
Consolidated Revenues for DPL stood at Rs 243cr for Q1FY12, up by 14% y-o-y & decline of
30% q-o-q. The growth was mainly led by marketable molecules segment. Revenues from
India CRAMS business stood at Rs 84cr, growth of 84% y-o-y. Vitamin-D segment grew by
45% y-o-y & 44% q-o-q. Carbogen Amcis continues to make losses with very lower
contribution this quarter. Restructuring continues at Carbogen Amcis & is expected to
improve in second half of the financial year.
Operating profit for Q1FY12 stood at Rs 50 cr, de-growth of 11% y-o-y & 15% q-o-q. OPM
improved by 370bps q-o-q and declined by 570bps y-o-y & stood at 20.4% mainly due to
higher contribution from India and Vitamin-D business. Also employee expenses & other
expenses went up 14% & 25% respectively y-o-y which affected the margins.
Reported Net profit for Q1FY12 was at Rs 15cr, down by 49% y-o-y & 31% q-o-q. NPM
contracted by 740bps y-o-y & was almost flat q-o-q. Margins were affected mainly on the
back of higher interest expense which grew by 75% y-o-y.
Valuation & recommendation:
Due to delay in execution of its contracts & commencement of few facilities, we revise
our earning estimate and recommend HOLD on the stock. The company’s profitability still
continues to bleed & the turnaround is expected to happen in 2HFY12. We value the
company at 11x its FY12 EPS of Rs 6.4 arriving at a target price of Rs 71 with an upside
potential of 9.2%. At CMP of 65, the company is trading at 10.1x its FY12 EPS of Rs 6.4 &
6.5x its FY13 EPS of Rs 10.