Accumulate Dishman Pharma; target of Rs 64: Dolat Capital

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Accumulate Dishman Pharma; target of Rs 64: Dolat Capital

Dolat Capital is bullish on Dishman Pharma and has recommended accumulate rating on the stock with a target of Rs 64 in its February 10, 2012 research report.

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Dolat Capital is bullish on Dishman Pharma and has recommended accumulate rating on the stock with a target of Rs 64 in its February 10, 2012 research report.

"Dishman Pharma's Q3FY12 revenue grew 11.9% YoY to ` 2.66bn. The CRAMS segment's revenue (64% of sales) grew 7% YoY to ` 1.69bn- suppressed by lower order execution from the Indian business. Marketable molecules (MM) delivered 31% YoY growth to ` 963mn, mainly on account of 36% YoY growth in fine chemicals business. Carbogen Amcis (CA) generated revenue of ` 1.02bn (up 29% YoY) and recorded an EBITDA of ` 76.7mn (` 30.4mn loss in Q3FY11). The subsidiary has begun turning around and the management expects it to sustain profitability in the coming quarters. CA entered in to an contract with Astellas Pharma to supply a new oncology product which revenue potential of Euro 18mn per annum."

"EBITDA margins (excluding forex impact) stood significantly higher YoY at 20.1%. Margin expansion was aided by lower employee costs (down 420bps YoY) and raw material costs (down 380bps YoY). Restructuring initiatives at CA yielded in a CHF 1.7mn savings in employee cost. The company recorded a forex gain for quarter of ` 81mn. Adj.PAT (excl. fx items) stood at ` 86mn, slightly below our estimate of ` 100mn due to higher tax outgo. New facilities of Unit 9 (oncology), Unit 13 (Vit D-3) and Unit 10 (disinfectant) have all commenced operations. However, we do not anticipate significant revenue contribution from them in FY12E. The management retains earlier revenue growth guidance of 15% during FY12E and has guided for 20% revenue growth for FY13E."

"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 CRAMS projects in hand yet to realize full potential. Also, profitability of the MM segment is expected to further improve, aided by sales of the high-margin benzethonium and higher revenue contribution from the fine chemicals business. A gradual improvement in CA's operational performance and higher tax outgo will impact near-term earnings growth. At a CMP of ` 60, the stock trades at 11.4x FY12E and 7.5x FY13E earnings. We recommend Accumulate with target price of ` 64 (8xFY13E earnings)," says Dolat Capital research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment