India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Dishman Pharma
Worst over, set for revival; maintain Buy
Management meet takeaways. We recently met the Dishman
management and visited the new high-potency (HIPO) plant (unit
IX). The plant would be operational in Jan ’11 and Dishman
expects to begin commercial supplies of 3-4 new contracts in the
next one year. Contract research business has not picked up and
remains under pressure. FY11 guidance has been maintained at
10% revenue growth and 23% EBITDA margin. We expect
FY12e to be much stronger, with ~20% revenue growth.
Visibility improves. After six quarters of revenue decline, we
expect the company to start reporting some growth from 3QFY11
and strong growth thereafter. This is based on improving business
visibility on the back of commencement of operations at the
HIPO facility (unit IX) from Jan ’11 and incremental sales from
new contracts.
Strong potential pipeline. Dishman has a strong potential
pipeline for CRAMS but the timing of commercial execution is a
key concern. The pipeline includes commercial supply of a CVS
intermediate to an EU MNC, another CVS product to a US MNC,
a master supply agreement with a US customer, two small longterm
contracts from the HIPO facility, and commercialisation of
disinfectant plant in FY12.
Valuation and risks. Given the recovery in business and the
attractive valuations, we maintain Buy on the stock, which trades
at 10.6x FY11e and 7.9x FY12e EPS. Risks: Delay in
commercialisation of contracts and currency fluctuations.
No comments:
Post a Comment