Dolat Capital recommended accumulate rating on Indoco Remedies with a target price of Rs 235 in its research report dated November 07, 2017.
Dolat Capital's research report on Indoco Remedies
Indoco posted results ahead of our estimates. Revenues were slightly better than our estimates. Sales was up 1% YoY (against our estimate of 4% fall) as formulations business was flat YoY at ` 2.6bn. API segment grew 8% YoY. EBITDA stood at ` 409mn, in line with our estimate. While negative tax restricted PAT decline to 11% YoY (our estimate of 33% dip).
The company’s strong growth trajectory is tapered to mid-level, post the US FDA warning letter and GST impact. We closely watch USFDA warning letter progress. The strong pipeline and bunch of good assets in the kitty offers a lot of promise. Our ANDAs filings analysis for US market reflect sturdy earnings boost given the specialty focus on Sterile Ophthalmic and own dossier filings in injectable. We expect these filings to drive growth traction after successful resolution of warning letter. WL is expected to delay management guidance of ` 3.0bn revenue by FY20E-22E. Capacity-wise, company has established its base to support for next 5 years’ growth. We expect growth from India business, EU and ROW to support earnings in FY18E. Considering the above, we maintain Accumulate at dips. At CMP of ` 260, the stock trades at 31x FY18E EPS of ` 8 and 24x FY19E EPS of ` 11.
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