BUY :Target: INR 471 Elder Pharmaceuticals Ltd.:: Unicon

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Buy
CMP: INR 347
Target: INR 471
Elder Pharmaceuticals Ltd. is an integrated pharmaceutical company that is mainly involved in manufacturing & sales of
branded formulations and Active pharmaceutical Ingredient (API). Elder has its presence in niche therapeutic segments
like women’s healthcare, wound & pain management, Neutraceuticals and Lifestyle disease care portfolio with strong
brands like Shelcal, Eldervit, Chymoral etc that have dominant market shares in their respective segments. The company
has strong alliances with almost 24 international innovator companies for in-licensing their products in India.
Investment Rationale
Strong domestic foothold
Elder derives 76% of its revenue from Domestic business and has been a strong player in branded formulation space.
The company has some strong brands like Shelcal, Eldervit, and Chymoral that has established Numero –Uno
positions amongst their peers. Most of its brand has a dominant market share in its respective segments. Domestic
business has been the primary focus of the company with the extensive brand portfolio across therapies. Despite
strong competition in the domestic market, Elder has been able to maintain its growth rate due to its strong brand
image and strong rapport with the medical fraternity.
In-licensing deals & Strong product pipeline
Elder generates around 6% of its revenue from in-licensing deals. Elder has successful in-licensing agreements with
around 24 international innovator companies, for marketing their products in India. Considering Elder’s past record
of the in-licensing deals and its ability to convert the products into big brands, the alliances with innovators seem to
be a positive future growth strategy for the company. The company has a strong product pipeline of around 35
products, which are expected to be launched over a period of 3-4 yrs.
Wide network coverage and expansion of geographic presence
Elder is concentrating on expanding marketing & distribution reach with a particular focus on rural & semi-urban
markets, thus strengthening its domestic business. The company has taken initiatives like creating new divisions viz;
Elvista & Adventus, increasing MR strength and widening the therapeutic coverage. Currently, Elder covers
approximately, 410000 doctors and 80,000 pharmacies every month.
International acquisition to aid the company’s growth
Elder recently acquired 100% stake in UK based NeutraHealth Plc, with an aim to gain access to the multiple brands
in the UK and establish a footprint in the regulated EU markets. The acquisition of NeutraHealth with an investment
of INR 1340 mn has been a synergetic operation. With an intention of entering the German market, Elder acquired
Biomeda Ltd. (having a stake of 92.2% in the company) with an investment of INR 400 mn. Elder is expected to
make a CAPEX of around INR 220 mn in Biomeda, for up-gradation of its facilities and make it EU compliant.
Outlook & Valuation
The stock currently trades at 8.3x & 6.4x its FY12e and FY13e earnings. Given the strong presence in domestic space and
product pipeline with market leading brand portfolio, the growth prospects of the company look very strong. We
recommend Elder Pharmaceuticals Ltd. with BUY rating and a target price of 471, valuing the stock at 8.5x its FY13e
earnings with medium to long-term perspective.

RBI’s third quarter monetary policy review ::Unicon Research

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RBI’s third quarter monetary policy review

On the backdrop, of challenging global & domestic economic environment RBI in its third quarter review decided to

• Reduced the cash reserve ratio (CRR) by 50 bps to 5.5%

• Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.5%

• Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5% and the marginal standing facility (MSF) rate at 9.5%

• The Bank Rate has been retained at 6%

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Thanks and Regards

Unicon Research

OnMobile Global Ltd - Stock Idea ::Unicon Research

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Investment Rationale:

• Medium term growth prospects look positive for Indian VAS industry

• Mass appealing VAS products with diversified portfolio has made OMGL a leading MVAS provider

• Investments in emerging markets propelling international business

• Higher adj. EPS going forward is backed by available growth opportunities and increase in EBITDA margins

Valuation:

With higher penetration levels in LatAm and Africa and expected revival on the domestic front we estimate a 3-year revenue and adj. EPS CAGR of 16.2% and 16.3% respectively. Further, divestment of remaining stake in Verse Innovation Pvt. Ltd. is likely to garner a pre-tax profit of INR 700mn during FY12. Coming to stock performance, OMGL had underperformed the whole market and lost over 50% of its share price in the last one year. At CMP of INR 72.4, the share is currently trading at 15x 12-month historical PE (adj. EPS) as against a one-year median PE of 18x. Based on this data, we value OMGL stock at 14.4x (a 20% discount to median PE) our estimated FY13 EPS of INR 6.5, thus giving a target price of INR 93.6 and an upside potential of 29.3% in the next 12-18 months. Thus we recommend our investors to BUY OMGL shares.

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Thanks and Regards

Unicon Research

Wondering what to pick for Muhurat trading? Moneycontrol

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Avinash Gorakshakar, VP - Research, Edelweiss Financial Advisory

Sectors that will make maximum sales during Diwali: Consumer Electronics
Stock picks in the run-up to Diwali: Agro-based stocks, especially fertilizers; Banking like Axis, ICICI
Sectors to avoid for now: Construction, Capital Goods, Realty
Finally, Muhurat picks: Deepak

Jigar Shah, Head of research, Kim Eng

Diwali sales: Retail and Automobile. Little bit in entertainment since people will go watch movies.
Stock pick: Consumer sector stocks like Pantaloon, Bata; Entertainment player such as Eros
Avoid: Infra, Metals and Mining, Realty, Telecom
Muhurat picks: Petronet LNG, Hathway,

Deven Choksey, Managing director, KRChoksey

Diwali sales: Market is not too gung-ho about Diwali sales this time. No one sector will stand out.
Stock picks: Mostly stocks where fundamentals are strong and price is also cheap.
Avoid: Sectors where government policy is playing havoc, like Draft Mining Bill.
Muhurat Picks: SBI, IndusInd Bank


Karthik Mehta, AVP- Institutional Equity Research, Sushil Finance

Diwali sales: Textile and Consumer white goods and brown goods
Stock picks: Mostly earnings-based momentum. Godrej Industries is rightly positioned to cater to all needs.
Avoid: Steel and Metal, Realty and Passenger vehicles (cars)
Muhurat picks: Godrej Industries, Wabco India, Navneet Publications, BOC India, Oracle Financial Services


Madhumita Ghosh, Vice President-PMS & Research, Unicon Financial

Diwali sales: Consumer Durables, Paints
Stock Picks: Banking and beaten down ones such as Real Estate, Infrastructure and Capital Goods
Avoid: FMGC, Oil and Gas
Muhurat picks: Rallis India, Biocon, Coromandel International, Yes Bank


Varun Goel, Head of Equity PMS- Karvy Private Wealth

Diwali sales: Consumer Durables
Stock pick: Private sector banks
Avoid: IT and Metal
Muhurat picks: Banking and Auto stocks

Quarterly Earnings Preview - Q2FY12 ::Unicon

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Unicon Quarterly Earnings Preview - Q2FY12

Indian market continued to face challenges and the markets fell by more than 12% in the quarter ended September 2011 which was one of the highest fall after October –December quarter 2008. This was contributed majorly by global headwinds in terms of downgrading of US sovereign debt and Euro crisis leading to large scale FII outflow. Lack of strong leadership in Europe and the politics in Washington are further denting the investor confidence in the region. Greece is on the verge of default and the steps taken by the Euro zone nations to bail it out have not worked. Greece has a debt of close to USD 400 bn and now has a debt greater than its GDP.

In addition to this the domestic economy also registered a slower growth of 7.7% in Q1FY12 vs 9.3 in Q1FY11 & Industrial production fell by 3.3% in July 11. On the political front, last quarter saw major anti-corruption movement taking a front seat along with unfolding of major scams, which affected the political stability in the country. Lack of reforms in the country was also one of the main reasons for slower growth. Another major challenge for the economy has been the elevated levels of inflation. High inflation has been putting pressure on RBI to take anti inflationary measures (increasing the interest rates) at the cost of economic growth. Investments in industries and credit growth thus been hampered in this high interest rate regime.

Going forward, we expect certain solutions by the world governments, international agencies to control global economic crisis. Debt reduction plans of the Obama administration & future plans of the FED could be decisive in engaging confidence of the global investors. Rebalancing of global currencies and EU’ decision on Euro bonds along with other cooperative measures would lay the foundation for stable global fundamentals. The slower global growth will drag down the commodity prices going ahead. This will help the domestic inflation to taper down from current high levels. On domestic front we expect the government continue to take corrective actions on a) high inflation, b) high fiscal deficit, c) erratic FII flows d) changes in the FDI policy.

Redressal of these issues will provide much needed stability to economic growth. We believe, the rural economy would continue to remain robust on the back of good monsoon in 2011 supporting the consumption led demand. Thus, we expect the Indian economy to register growth of 7.5% in 2011-12.

We believe that cooling of commodity prices and strengthening of the US dollar could be the driving factors for Indian markets. The markets would continue to be range bound till the global concerns are addressed properly & domestic economy stabilizes. The last quarter of FY 12 would give a clearer picture wherein the corporate earnings should improve with lower raw material prices. Thereafter the rerating would lead to expansion of P/Es on selective basis. In the short term till uncertainty prevails sectors like FMCG, IT and Agri should outperform the index but for medium to long term one should start accumulating interest sensitive’s like Banks, Infrastructure and automobiles. 

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Thanks and Regards

Unicon Wealth Research