Buy Unichem Labs; target of Rs 330: Karvy

2825 Investors following Unichem Labs. Share this News with them.

0

Like this story, share it with millions of investors on M3

Buy Unichem Labs; target of Rs 330: Karvy

Broking house, Karvy Stock Broking is bullish on Unichem Laboratories and has recommended buy ratin on the stock with a target of Rs 330.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Hold Glenmark Pharma; target of Rs 600: P-Sec Hold BHEL, says P Sec Buy Shree Cements: ASK Raymond TVS Motor an underweight: JP Morgan Bank of India an outperformer; target of Rs 195: Karvy Unichem Labs BSE | NSE 25/05/12 Are Mutual Funds betting on Unichem Labs?

Broking house, Karvy Stock Broking is bullish on Unichem Laboratories and has recommended buy ratin on the stock with a target of Rs 330.

Karvy Stock Broking report on Unichem Laboratories:

Unichem Lab's continuing focus on the high margin domestic formulation's business (76% of revenues) and completion of a major portion of its investment phase in key markets is expected to pan out in the foreseeable future. The above initiatives will culminate in CAGR revenue and earnings growth of 21% and 23% respectively till FY08E. The icing on the cake would be the management control of Niche Generics, which would enable the company to give better direction to the business. We rate the stock as a Buy.

Domestic Formulations to maintain the growth momentum:

Unichem Labs domestic formulations revenues (76% of total revenues) is expected to grow by 15% and 14% for FY07 and FY08 respectively on the back of 20 plus product introductions and line extensions. Increasing marketing investments in chronic segments, focus on brand promotion, unique combination products and high fraternity among the doctor community would enable the company to sustain  its momentum in this segment. 

Formulations exports on a growth trajectory:

International formulations business (12 % of revenues) is expected to scale up to Rs850mn in FY2007E and Rs 1,200mn by FY2008E. The high growth will be mainly driven by fresh registrations panning out in various markets across Europe, Asia, Africa and Latin America. Unichem with a cache of 432 registrations and 300 in the pipeline is set to reap the benefits of its investments in the next couple of years. 

Niche to get a new direction:

The company's profile is all set to change from dossier selling, procuring bulk and converting formulations and then selling formulations. Unichem is set to activate majority of its dossiers and will shift its sourcing to India. Further, the company is all set to file for registrations from Niche for the Middle East market which will shorten the entry time span in these markets.

Active Pharmaceutical Business to undergo a sea change:

The current API business is all set to change with the company migrating from a pure API play to a API and a contract manufacturer. This will enable the company to migrate to a much higher margin profile alongwith a higher margin play.

Reasonable Valuations coupled with strong growth make it a BUY:

The company's strong revenue momentum, margin expansion and profit growth are aided by a sustained growth in domestic business, higher traction in formulations exports business. With an earnings growth of 29% and 18% for FY07 and FY08 respectively despite having much hugher R&D outlet, change in API and Niche perception and scaleup to a stronger business model, the company would get re-rated. We rate the stock as BUY with a price target of Rs 330 based on 11.3x FY 2008E.