Motilal Oswal neutral on Dishman Pharma

Motilal Oswal has maintained neutral rating on Dishman Pharma with a target of Rs 103, in its August 2, 2012 research report.

“Dishman's 1QFY13 performance was above our estimates. It reported 32.9% YoY growth in revenues to INR3.15b (v/s est INR3.04b). EBITDA grew 91.3% YoY to INR836m (v/s est INR643m) while Adj PAT increased 156% YoY to INR387m (v/s est of INR143m). EBITDA grew 91.3% YoY to INR836m (v/s est INR643m) on a low base led by healthy topline growth and favorable currency. EBITDA margin improved 810bp YoY to 26.5% (v/s est 21.2%). The company reported 156% YoY growth in Adjusted PAT to INR387m (v/s est of INR143m) led by strong operational performance and lower than estimated tax expense during the quarter.”

“The macro environment for CRAMS business remains favorable given India's inherent cost advantages and chemistry skills. We believe Dishman's India operations will benefit from increased outsourcing from India, given its strengthening MNC relations and expansion of some of the existing customer relationships. However, the company needs to ramp-up its contracts with innovators to take advantage of the macro opportunity. We expect revenue CAGR of 18.6%, EBITDA CAGR of 27% and earnings CAGR of 56.9% over FY12-14. Earnings growth is led by robust operational performance and lower tax expense. Low asset utilization, high debt and delayed ramp-up of CRAMS contracts remain our main concern.”

“We have upgraded our earnings estimates for FY13 and FY14 by 15.6% and 4.1% respectively. Based on our revised estimates, the stock currently trades at 5x FY13E and 4.4x FY14E earnings. RoCE will continue to be subdued till new facilities and CRAMS contracts ramp up. We maintain Neutral rating with price target of INR103 (6x FY14E EPS),” says Motilal Oswal research report.    

FIIs holding more than 30% in Indian cos

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