Buy Orchid Chemical; target of Rs 140: Angel Broking

Angel Broking is bullish on Orchid Chemicals and Pharmaceuticals and has recommended buy rating on the stock with a target of Rs 140, in its August 14, 2012 research report.

“Orchid Chemicals (Orchid) reported lower-than-expected numbers for 1QFY2013. For the quarter, the net sales came in at Rs 365cr, much lower than the estimated Rs 500cr. However, the main disappointment came on the operating front, where the OPM came in at 3.3%, on the back of lower sales and rupee deprecation. This led the company to post a loss of Rs 46cr during the quarter. Although the stock has declined sharply, given the valuations, we maintain our Buy view on the stock.”

“Lower-than-expected performance: For the quarter, on a consolidated level, Orchid reported net sales of Rs 365cr, a decline of 11.7% yoy. The company’s gross margin declined by 10.9% to 37.7%; which resulted in OPM coming in at 3.3% vs 13.0% in the corresponding period last year. This along with a higher interest expenditure led to a net loss at Rs 46cr vis-à-vis expectation of net profit of Rs 32cr.  Below expectations revenue growth: For the quarter, on a consolidated level, Orchid reported net sales of Rs 365cr, registering a decline of 11.7% yoy. In terms of filings, the cumulative filings of Abbreviated New Drug Applications (ANDAs) in the US stood at 43 which include 8 Para-IV FTF (first–to–file) applications.”

“We expect Orchid to post net sales of Rs 2,434cr, with EBITDA margin of 16.0% in FY2014E. The stock is currently trading at 8.4x FY2013E and 6.1x FY2014E earnings. We maintain our Buy rating on the stock with a revised target price of Rs140, says Angel Broking research report.

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