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Q1 FY12 results meet estimates. Cost cutting at Carbogen Amcis (CA) to aid
earnings growth.
Revenue grew 17.5% YoY to Rs 2.37bn, marginally higher than expectations.
The CRAMS segment’s (67% of sales) revenue grew 11.3% YoY to Rs 1.59bn
while the marketable molecule (MM) segment grew 32.5% YoY to Rs
784.5mn. Other operating income included forex gain of Rs 46.4mn against
Rs 100.5mn in the previous corresponding quarter.
Robust growth in MM was mainly on account of 45% YoY growth in the fine
chemicals business.
Carbogen Amcis’s (CA) revenue declined 16% at Rs 748mn and recorded a
loss of Rs 28.2mn at the EBITDA level.
During the quarter, the company has realised USD 6mn post supplies of
Brilinta intermediate to AstraZeneca for the EU market. The product got
recently approved in the US and supplies shall commence only in FY13E.
EBITDA margins (before forex) declined to 18.7% of sales (down 340bps
YoY), primarily due to a substantial rise in raw material costs. Operating
loss at Carbogen Amcis dented overall operating performance.
Interest costs grew 67.5% YoY to Rs 137mn, while tax rate stood lower at
10.4%. Consequently, PAT (before forex adjustments) declined 39% YoY to
Rs 105mn.
New facilities such as the Unit 9 (hi-po facility), disinfectant formulation
and the Vit D facility are likely to go on-stream from H1FY12E onwards.
However, we do not anticipate significant revenue contribution in FY12E.
The management retains its earlier guidance — revenue growth of 15%
during FY12E.
Financial Highlights
Revenue grew 17.5% YoY to Rs 2.37bn — slightly higher than expectations.
The CRAMS segment’s (67% of sales) revenue grew 11.3% YoY at Rs 1.59bn
while MM grew 32.5% YoY to Rs 784.6mn. Other operating income included
forex gain of Rs 46.4mn against Rs 100.5mn in the previous corresponding
quarter (included in other operating income).
Higher contribution from MM was mainly on account of 45.1% YoY growth
in the fine chemicals business, which delivered operating margins of 24.3%
(14.8% in Q1FY11) and is expected to sustain at this level.
CA revenues declined 16% at Rs 748mn and recorded a loss of Rs. 28.2mn at
the EBITDA level and net loss stood at around Rs 70-80mn.
On a consolidated basis, EBITDA margins (before forex) declined to 18.7%
of sales — lower by 340bps YoY — primarily due to a substantial rise in raw
material costs (up 320bps YoY at 31% of sales) while other expenses
increased by 120bps YoY at 20.1% of sales. Operating loss at CA dented
overall operating performance.
Interest costs grew 67.5% at Rs 137mn. Tax rate stood lower at 10.4% (11.2%
- Q1FY11). Consequently, PAT (before forex adjustments) fell 39% YoY to Rs
105mn.
Key updates
In its attempt to restore CA’s profitability, the management has retrenched
manpower mainly in the custom research segment. The benefit of this
exercise will reflect in FY12E (cost savings of CHF 8mn). During this year CA
is expected to witness flat revenue growth YoY with operating profit of
CHF 11mn. It expects to break even at the PAT level by end of this year.
Dishman had earlier entered into a contract for supply of intermediate for
Brilinta (CVS product) with AstraZeneca Plc. Dishman has a USD 12mn order
for supplies in EU, out of which they have realised sales worth USD 6mn,
while the balance USD 6mn would accrue in subsequent quarters. The
product got recently approved in the US and supplies for the same will
commence only in FY13E, driving the cumulative product offtake to threefold
its current levels. The management guides that the final product is
slated to be a multi-billion dollar product in the future and will be sourced
from three global suppliers.
Dishman had entered into an agreement with a US MNC for an anti-TB
medicine product, wherein they have successfully completed the validation
batches for the client. The client has received marketing authorisation for
this product and plans to initiate filing its DMF application to the USFDA.
This is a high-value product with price realizations of • 1600 per k.g. with
order requirements of 5 tonnes p.a. (expected to go up to 15 tonnes per
annum).
The China facility has commenced operations. It has completed
manufacturing batches for one API while it has started manufacturing
batches for two new API products. Dishman Pharma, through its China plant,
has entered into a contract with Zeria Pharma (Japan) for manufacturing
API/intermediates. The China facility is projected to allocate resources
equally between CRAMS and manufacturing of generic APIs. The
management expects its China facility to start contributing significantly
from 2HFY12E.
The management guided that Abbott Plc has preferred Dishman to be the
sole supplier for Eprosartan Mesylate. The product requirement is currently
at around 200 tonnes per annum and is expected to double by FY13E.
The disinfectant facility has commenced operations during the month. They
have started manufacturing batches for various products. The company
has hired 35 people in production and 40 people in sales for this unit.
Dishman has commenced manufacturing of Benzethonium recently. It plans
to supply 120 tonnes to Sanofi (one of the customers) September 2011E
onwards. Further increase in supplies is likely as more clients get added.
This product carries high realisations of USD 50 per kg.
Revenues from fine chemical business is likely to gain further traction on
account of shortage of FDA approved Vit D. producers globally. Its new
facility - Unit 13 will commence production from September 15, 2011, which
would add to topline Q3FY12E onwards.
Other Highlights:
The company has guided FY12E top-line growth of 15% (led by Dishman
standalone and fine chemicals business). The tax rate guidance for FY12E
stands higher at 20%.
Gross debt as of June 2011 stands at Rs 9.15bn. The capex for FY12E and
FY13E is guided at Rs 1bn.
Valuation
Dishman Pharma is on course to restoring normalcy in operations. However,
complete recovery is still a few quarters away. In the near term, Dishman
India (standalone) is likely to gain traction with some of the CRAMS projects
(validation batches) going on stream. Also, profitability of the MM segment is
expected to further improve aided by sales of the high-margin Benzethonium
and higher revenue contribution from fine chemical business. A gradual
improvement in CA’s operational performance and higher tax outgo will impact
near-term earnings growth.
At a CMP of Rs 90, the stock trades at 11.8x FY12E and 9.3x FY13E earnings. We
recommend Accumulate with target price of Rs 97 (10xFY13E earnings).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q1 FY12 results meet estimates. Cost cutting at Carbogen Amcis (CA) to aid
earnings growth.
Revenue grew 17.5% YoY to Rs 2.37bn, marginally higher than expectations.
The CRAMS segment’s (67% of sales) revenue grew 11.3% YoY to Rs 1.59bn
while the marketable molecule (MM) segment grew 32.5% YoY to Rs
784.5mn. Other operating income included forex gain of Rs 46.4mn against
Rs 100.5mn in the previous corresponding quarter.
Robust growth in MM was mainly on account of 45% YoY growth in the fine
chemicals business.
Carbogen Amcis’s (CA) revenue declined 16% at Rs 748mn and recorded a
loss of Rs 28.2mn at the EBITDA level.
During the quarter, the company has realised USD 6mn post supplies of
Brilinta intermediate to AstraZeneca for the EU market. The product got
recently approved in the US and supplies shall commence only in FY13E.
EBITDA margins (before forex) declined to 18.7% of sales (down 340bps
YoY), primarily due to a substantial rise in raw material costs. Operating
loss at Carbogen Amcis dented overall operating performance.
Interest costs grew 67.5% YoY to Rs 137mn, while tax rate stood lower at
10.4%. Consequently, PAT (before forex adjustments) declined 39% YoY to
Rs 105mn.
New facilities such as the Unit 9 (hi-po facility), disinfectant formulation
and the Vit D facility are likely to go on-stream from H1FY12E onwards.
However, we do not anticipate significant revenue contribution in FY12E.
The management retains its earlier guidance — revenue growth of 15%
during FY12E.
Financial Highlights
Revenue grew 17.5% YoY to Rs 2.37bn — slightly higher than expectations.
The CRAMS segment’s (67% of sales) revenue grew 11.3% YoY at Rs 1.59bn
while MM grew 32.5% YoY to Rs 784.6mn. Other operating income included
forex gain of Rs 46.4mn against Rs 100.5mn in the previous corresponding
quarter (included in other operating income).
Higher contribution from MM was mainly on account of 45.1% YoY growth
in the fine chemicals business, which delivered operating margins of 24.3%
(14.8% in Q1FY11) and is expected to sustain at this level.
CA revenues declined 16% at Rs 748mn and recorded a loss of Rs. 28.2mn at
the EBITDA level and net loss stood at around Rs 70-80mn.
On a consolidated basis, EBITDA margins (before forex) declined to 18.7%
of sales — lower by 340bps YoY — primarily due to a substantial rise in raw
material costs (up 320bps YoY at 31% of sales) while other expenses
increased by 120bps YoY at 20.1% of sales. Operating loss at CA dented
overall operating performance.
Interest costs grew 67.5% at Rs 137mn. Tax rate stood lower at 10.4% (11.2%
- Q1FY11). Consequently, PAT (before forex adjustments) fell 39% YoY to Rs
105mn.
Key updates
In its attempt to restore CA’s profitability, the management has retrenched
manpower mainly in the custom research segment. The benefit of this
exercise will reflect in FY12E (cost savings of CHF 8mn). During this year CA
is expected to witness flat revenue growth YoY with operating profit of
CHF 11mn. It expects to break even at the PAT level by end of this year.
Dishman had earlier entered into a contract for supply of intermediate for
Brilinta (CVS product) with AstraZeneca Plc. Dishman has a USD 12mn order
for supplies in EU, out of which they have realised sales worth USD 6mn,
while the balance USD 6mn would accrue in subsequent quarters. The
product got recently approved in the US and supplies for the same will
commence only in FY13E, driving the cumulative product offtake to threefold
its current levels. The management guides that the final product is
slated to be a multi-billion dollar product in the future and will be sourced
from three global suppliers.
Dishman had entered into an agreement with a US MNC for an anti-TB
medicine product, wherein they have successfully completed the validation
batches for the client. The client has received marketing authorisation for
this product and plans to initiate filing its DMF application to the USFDA.
This is a high-value product with price realizations of • 1600 per k.g. with
order requirements of 5 tonnes p.a. (expected to go up to 15 tonnes per
annum).
The China facility has commenced operations. It has completed
manufacturing batches for one API while it has started manufacturing
batches for two new API products. Dishman Pharma, through its China plant,
has entered into a contract with Zeria Pharma (Japan) for manufacturing
API/intermediates. The China facility is projected to allocate resources
equally between CRAMS and manufacturing of generic APIs. The
management expects its China facility to start contributing significantly
from 2HFY12E.
The management guided that Abbott Plc has preferred Dishman to be the
sole supplier for Eprosartan Mesylate. The product requirement is currently
at around 200 tonnes per annum and is expected to double by FY13E.
The disinfectant facility has commenced operations during the month. They
have started manufacturing batches for various products. The company
has hired 35 people in production and 40 people in sales for this unit.
Dishman has commenced manufacturing of Benzethonium recently. It plans
to supply 120 tonnes to Sanofi (one of the customers) September 2011E
onwards. Further increase in supplies is likely as more clients get added.
This product carries high realisations of USD 50 per kg.
Revenues from fine chemical business is likely to gain further traction on
account of shortage of FDA approved Vit D. producers globally. Its new
facility - Unit 13 will commence production from September 15, 2011, which
would add to topline Q3FY12E onwards.
Other Highlights:
The company has guided FY12E top-line growth of 15% (led by Dishman
standalone and fine chemicals business). The tax rate guidance for FY12E
stands higher at 20%.
Gross debt as of June 2011 stands at Rs 9.15bn. The capex for FY12E and
FY13E is guided at Rs 1bn.
Valuation
Dishman Pharma is on course to restoring normalcy in operations. However,
complete recovery is still a few quarters away. In the near term, Dishman
India (standalone) is likely to gain traction with some of the CRAMS projects
(validation batches) going on stream. Also, profitability of the MM segment is
expected to further improve aided by sales of the high-margin Benzethonium
and higher revenue contribution from fine chemical business. A gradual
improvement in CA’s operational performance and higher tax outgo will impact
near-term earnings growth.
At a CMP of Rs 90, the stock trades at 11.8x FY12E and 9.3x FY13E earnings. We
recommend Accumulate with target price of Rs 97 (10xFY13E earnings).
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