Buy Indoco Remedies; target of Rs 583: Angel Broking

“For 2QFY2012, Indoco Remedies (Indoco) declared in-line results at the revenue front, reporting growth of 9.4% yoy. However, on the net profit front, growth came in lower than expected, declining by 9.4% yoy. This was mainly on account of OPM declining by 95bp yoy to 12.4% (13.4%), lower than our estimates. The domestic formulation segment grew moderately by 5.3% yoy during the quarter, contributing 64.4% to the total revenue, whereas formulations exports increased by 23.6% yoy.”

“Indoco reported net sales of Rs 145cr (Rs 132cr), up 9.4% yoy, almost in-line with our expectation of Rs 148cr for 2QFY2012, mainly on account of lower sales from the domestic high-margin formulations segment. Gross margin came in at 54.2%, in-line with 2QFY2011. OPM decreased by 95bp yoy to 12.4% (13.4%). Net profit for the quarter came in at Rs 13.8cr, 23.7% below our estimate of Rs 18.1cr.”

“We expect net sales to post a 19.6% CAGR to Rs 685cr and EPS to post a 15.6% CAGR to Rs 55.5 over FY2011-13E. At Rs 373, the stock is trading at 8.8x and 6.7x FY2012E and FY2013E earnings, respectively. We recommend Buy on the stock with a revised target price of Rs 583,” says Angel Broking research report.  

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