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M a r g i n s p r e s s u r e h e r e t o s t a y …
Indoco Remedies’ Q3FY12 results were below our expectations. Barring
net sales, which were higher than our estimates, EBITDA margins and net
profit continued to disappoint. Net sales increased by 23.8% to | 141.5
crore, above our expectation of | 131 crore on the back of recovery in the
domestic formulations business (up by 14.8%) and strong growth in
export formulations (up 36%). Despite recovery in the high margin
domestic formulations business and favourable currency, EBITDA
margins declined 120 bps YoY to 11.5% on account of higher
employee/marketing costs and forex loss. EBITDA margins adjusting for
forex loss were at 13.4%, still lower than our expectation of 14.8%. With
the commission of the third manufacturing faculty in Goa, both interest
and depreciation increased sharply, which led to net profit declining by
6% to | 8.3 crore. We are maintaining our HOLD rating on the stock.
ƒ Recovery in domestic formulations, a surprise
After two muted quarters, the domestic formulations business
witnessed a substantial recovery. During the quarter, the
formulations business grew 14.8% YoY to | 84.97 crore. The growth
was driven by therapies such as respiratory and stomatologicals,
which grew 23.6% and 23.1%, respectively.
ƒ Formulations sales to regulated markets up 39% YoY
Formulation sales to regulated market grew by 39% to | 37 crore as
it started commercial supplies of anti-diabetic products to Europe.
Till date, it has filed 13 ANDAs with the USFDA of which seven were
filed under the Watson deal. The first product would be launched
under the Watson deal in the US market in Q3FY13.
V a l u a t i o n
Indoco is currently trading at ~10.8x FY12E EPS of | 37.7 & ~7.6x of
FY13E EPS of | 53.6. We expect sales, EBITDA and profit of Indoco to
grow at a CAGR of 19.5%, 17.9% and 13.5%, respectively, between FY11
& FY13E. A persistent decline in EBITDA margin remains a major concern.
We expect a recovery in the EBITDA margin from Q1FY13 as revenues
CRAMS under the Aspen deal start. We value the stock at | 429 i.e. 8x
FY13E EPS of | 53.6. Existing investors are advised to hold the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M a r g i n s p r e s s u r e h e r e t o s t a y …
Indoco Remedies’ Q3FY12 results were below our expectations. Barring
net sales, which were higher than our estimates, EBITDA margins and net
profit continued to disappoint. Net sales increased by 23.8% to | 141.5
crore, above our expectation of | 131 crore on the back of recovery in the
domestic formulations business (up by 14.8%) and strong growth in
export formulations (up 36%). Despite recovery in the high margin
domestic formulations business and favourable currency, EBITDA
margins declined 120 bps YoY to 11.5% on account of higher
employee/marketing costs and forex loss. EBITDA margins adjusting for
forex loss were at 13.4%, still lower than our expectation of 14.8%. With
the commission of the third manufacturing faculty in Goa, both interest
and depreciation increased sharply, which led to net profit declining by
6% to | 8.3 crore. We are maintaining our HOLD rating on the stock.
ƒ Recovery in domestic formulations, a surprise
After two muted quarters, the domestic formulations business
witnessed a substantial recovery. During the quarter, the
formulations business grew 14.8% YoY to | 84.97 crore. The growth
was driven by therapies such as respiratory and stomatologicals,
which grew 23.6% and 23.1%, respectively.
ƒ Formulations sales to regulated markets up 39% YoY
Formulation sales to regulated market grew by 39% to | 37 crore as
it started commercial supplies of anti-diabetic products to Europe.
Till date, it has filed 13 ANDAs with the USFDA of which seven were
filed under the Watson deal. The first product would be launched
under the Watson deal in the US market in Q3FY13.
V a l u a t i o n
Indoco is currently trading at ~10.8x FY12E EPS of | 37.7 & ~7.6x of
FY13E EPS of | 53.6. We expect sales, EBITDA and profit of Indoco to
grow at a CAGR of 19.5%, 17.9% and 13.5%, respectively, between FY11
& FY13E. A persistent decline in EBITDA margin remains a major concern.
We expect a recovery in the EBITDA margin from Q1FY13 as revenues
CRAMS under the Aspen deal start. We value the stock at | 429 i.e. 8x
FY13E EPS of | 53.6. Existing investors are advised to hold the stock.
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