Buy Elder Pharma; target of Rs 405: ICICIdirect.com

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Buy Elder Pharma; target of Rs 405: ICICIdirect.com

ICICIdirect.com is bullish on Elder Pharmaceuticals and has recommended buy rating on the stock with a target of Rs 405 in its May 12, 2011 research report.

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ICICIdirect.com is bullish on Elder Pharmaceuticals and has recommended buy rating on the stock with a target of Rs 405 in its May 12, 2011 research report.

"Elder Pharma Q4FY11 results were above our estimates. Although the numbers were not comparable both YoY & QoQ basis on account of stake hike in Biomeda and NeutraHealth, the base business grew by ~17% YoY to Rs 221.8 crore. Overall net sales increased by 59.6% YoY to Rs 302.7 crore above our estimation of 264 crore. The combined sales of Biomeda and Neutral Health during the quarter were Rs 80.9 crore. EBITDA margins declined by 116 bps YoY to 17.8% on the back of consolidation of low margin businesses. However, EBITDA margins were still above our estimation of 16%. Despite robust 49% growth at the EBITDA level, the net profit grew by just 3% to Rs 17 crore on the back of higher depreciation and interest cost."

"Domestic sales increased by 15% to Rs 213.4 crore mainly driven strong growth in Shelcal, Chymoral, Formic and Eldervit brands. Elder is planning to launch 13-15 new products in FY12. Women Healthcare segment registered strong growth of 35% during the quarter to Rs 50.8 crore on the back greater traction in Shelcal brand & line extensions. Total sales of Shelcal brand & line extension for the current fiscal were Rs 175 crore. Shelcal K which was launched at the fag end of December 2010 and is expected to grow significantly."

"Elder is currently trading at ~8x FY12E EPS of Rs 46 and ~6x FY13E of Rs 57.8. We expect sales and PAT to grow at a CAGR of 27.4% and 33.5% in FY10-13E. Currently both NeutraHealth and Biomeda are in investment mode. We expect NeutraHealth to breakeven in the current fiscal. We would revisit the multiple once this happens. We have valued the stock at Rs 405, based on 7x FY13E EPS of Rs 57.8. We also recommend existing share holders who bought the stock at Rs 359 at our Q3FY11 result update to hold the stock," says ICICIdirect.com research report.

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