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M u t e d p e r f o r m a n c e …
Indoco Remedies’ Q1FY12 results were below our expectations. Net sales
increased 12.7% to | 125.6 crore, below our expectation of | 132 crore.
The sales growth was driven by healthy growth in the export formulation
business in regulated markets and domestic API business. EBITDA
margins declined 230 bps to 14.8% on account of increase in employee
cost and higher marketing overheads. Increase in the depreciation by
22% to | 3.9 crore and interest cost by 35% to | 11.7 crore led net profit
to decline 21% YoY to | 11.7 crore. We have reduced our price target by
~8% due to persistent margins pressure. However, we are maintaining a
BUY rating on this stock as we believe the major kicker will be supplies to
Watson and Aspen, which are likely to start from Q4 onwards.
ƒ Advance markets to drive growth, going ahead
The company has started supply of Metformin for the AOK German
tender under a tie-up with the Israel-based Dexcel with whom it has
signed an agreement. The supply contract is worth | 50 crore over a
span of two years.
ƒ Lower growth in anti-infectives segment hits domestic business
The domestic formulation business witnessed marginal growth of
8.4% YoY on the back of lower growth in anti-infectives, which
account for around 22% of total domestic sales. Due to increased
competition, the company is facing pricing pressure in this segment.
Other therapeutic segments like stomatologicals, pain/analgesics
and some life style products peaked during the quarter.
V a l u a t i o n
Indoco is currently trading at ~9x FY12E EPS of | 44.9 and ~7x FY13E
EPS of | 58.5. We expect the addition of a new field force and new
product launches to help Indoco to grow in line with industry growth.
Sales from the Aspen and Watson deals will improve the exports. Our
revised target price is | 468, based on 8x FY13E EPS of | 58.5. We also
recommend that investors who bought the stock at the earlier result
update recommendation average at the current level.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M u t e d p e r f o r m a n c e …
Indoco Remedies’ Q1FY12 results were below our expectations. Net sales
increased 12.7% to | 125.6 crore, below our expectation of | 132 crore.
The sales growth was driven by healthy growth in the export formulation
business in regulated markets and domestic API business. EBITDA
margins declined 230 bps to 14.8% on account of increase in employee
cost and higher marketing overheads. Increase in the depreciation by
22% to | 3.9 crore and interest cost by 35% to | 11.7 crore led net profit
to decline 21% YoY to | 11.7 crore. We have reduced our price target by
~8% due to persistent margins pressure. However, we are maintaining a
BUY rating on this stock as we believe the major kicker will be supplies to
Watson and Aspen, which are likely to start from Q4 onwards.
ƒ Advance markets to drive growth, going ahead
The company has started supply of Metformin for the AOK German
tender under a tie-up with the Israel-based Dexcel with whom it has
signed an agreement. The supply contract is worth | 50 crore over a
span of two years.
ƒ Lower growth in anti-infectives segment hits domestic business
The domestic formulation business witnessed marginal growth of
8.4% YoY on the back of lower growth in anti-infectives, which
account for around 22% of total domestic sales. Due to increased
competition, the company is facing pricing pressure in this segment.
Other therapeutic segments like stomatologicals, pain/analgesics
and some life style products peaked during the quarter.
V a l u a t i o n
Indoco is currently trading at ~9x FY12E EPS of | 44.9 and ~7x FY13E
EPS of | 58.5. We expect the addition of a new field force and new
product launches to help Indoco to grow in line with industry growth.
Sales from the Aspen and Watson deals will improve the exports. Our
revised target price is | 468, based on 8x FY13E EPS of | 58.5. We also
recommend that investors who bought the stock at the earlier result
update recommendation average at the current level.
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