Buy Elder Pharmaceuticals, target of Rs 535: Emkay

Emkay Research has maintained its buy rating on Elder Pharmaceuticals with target price of Rs 535 in its May 6, 2008 research report. "The company reported decent performance during the fourth quarter ended March 2008. Its top line grew by 32.3% YoY to Rs 1564 million during Q4FY08 as compared to corresponding quarter last year. For full year FY08, total revenue increased by 22% YoY to Rs 5481.4 million. In Q4FY08, Elder reported EBDITA growth of 37.8% YoY to Rs 333 million as compared to Rs 241.7 million in corresponding quarter last year. For FY08, EBDITA growth stood at 38.8% YoY to Rs 1148.1 million. Elder recorded 36.5% YoY growth at net profit level to Rs 204.2 million during Q4FY08 compared to corresponding quarter last year. For FY08, net profit witnessed growth of 36.1% YoY to Rs 718 million."

"We are quite optimistic about Elder's future revenue growth. The stock is currently trading at 8.2x FY09E EPS of Rs 44.6 and 5.8x FY10E EPS of Rs 63.5. It is trading at 7.2x FY09E and 5.6x FY10E EV/EBDITA. We believe these valuations are attractive and offer excellent long term investment opportunity considering its strong growth potential through in-licensing agreements, series of new product launches, presence in niche segments, likely CRAMS opportunities, expected growth in exports via acquisitions, effective cost cutting measures and substantial tax benefits arising from shifting its manufacturing activities to new plants located in tax free zones. We maintain 'BUY' on the stock with target price of Rs 535," says Emkay's research report

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