Buy Dishman Pharmaceuticals; target Rs 68: Angel Broking

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Buy Dishman Pharmaceuticals; target Rs 68: Angel Broking

Angel Broking is bullish on Dishman Pharmaceuticals and has recommended buy rating on the stock with a target price of Rs 68 in its November 16, 2011 research report.

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Angel Broking is bullish on Dishman Pharmaceuticals and has recommended buy rating on the stock with a target price of Rs 68 in its November 16, 2011 research report.

"Dishman Pharmaceuticals (Dishman) reported a lower-thanexpected net profit performance for 2QFY2012. The decline in net profit was majorly on the back of high interest expenses and non-cash forex expenses. However, after adjusting for the same, the company's net profit stood at Rs 10.0cr (although it was lower than our estimate of Rs 16cr). On the positive side, the company's top line posted good growth and its margin came just in-line with our expectation."

"Lower-than-expected performance during the quarter: Dishman reported net sales of Rs 269cr during 2QFY2012, reporting growth of 26.5% yoy and above our estimate of Rs 240cr. Segment wise, the CRAMS business grew by 5.0% yoy, whereas the market molecules (MM) business surprised with 93.1% yoy growth. Gross margin for the quarter dropped significantly to 63.7%. However, the company's operating margin witnessed a significant yoy improvement of 9.4%, ending the period at 17.5%, marginally lower than our estimate of 18.6%. However, the company reported net loss of Rs 6.3cr on the back of Rs 18.8cr loss on non-cash forex expenses during the quarter."

"We expect Dishman's net sales and net profit to come in at Rs 1,115cr and Rs 75cr, respectively, in FY2012. At current levels, Dishman is trading at 4.6x and 3.9x FY2012E and FY2013E earnings, respectively. Despite being conservative on the margin front, we believe the current valuations are attractive. Hence, we maintain our Buy recommendation on the stock with a target price of Rs 68," says Angel Broking research report.

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