Buy Indoco Remedies with a target of Rs 390: Angel Broking

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Buy Indoco Remedies with a target of Rs 390: Angel Broking

Broking house, Angel Broking is bullish on Indoco Remedies and has recommended buy rating on the stock with a target of Rs 390.

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Broking house, Angel Broking is bullish on Indoco Remedies and has recommended buy rating on the stock with a target of Rs 390.

Angel Broking report on Indoco Remedies:

Investment Argument

Exports to post Robust Growth:

"While a late entrant, the company has been focused on enhancing its presence in the exports market. Contract manufacturing activities in the Regulated markets (mainly Europe), would aid export growth of 42% in FY2006-08. With this the contribution of exports would increase from 16.0% in FY2006 to 21.4% in FY2008."

Eyeing Niche opportunities in US Generic Space:

"In US, the company is looking at niche segments like - Dermatology and Opthalmic to scale up its business in the region. Currently the company has 13 products under various stages of development. These products cumulatively have market size of USD 1.7 bn in US."

Domestic Market - Momentum to continue:

"The company is likely  to maintain its growth momentum in domestic markets. New product  launches in the Lifestyle segment would aid company to outpace the  Industry growth. For FY2006-08, we expect the domestic formulations  to grow at 17.0%."   

Robust growth expected in FY2006-08:

"A 27% growth on the sales front and improvement on the operating margins (177 bps improvement expected during FY2006-08) would aid the company to post Net Profit growth of 39% during FY2006-08."

Valuations

"At CMP, the stock trades at 8.1x FY2007E and 5.8x FY2008E Earnings. Over the last one year the stock has significantly underperformed the broader Indices. However, going forward we expect the robust Earnings growth to aid out-performance on the bourses. We initiate coverage on the stock with a BUY recommendation for a 12- month target price of Rs 390."