Buy Omkar Speciality; target of Rs 131: Mehta Equities

Mehta Equities is bullish on Omkar Speciality Chemicals and has recommended buy rating on the stock with a target of Rs 131 in its November 2012 research report.

“Omkar Speciality Chemicals Ltd, is one of the leading manufacturers of speciality chemicals, such as selenium derivatives, iodine derivatives, molybdenum derivatives, cobalt bismuth derivatives and pharma intermediates. OSCL has diversified business interests with a major presence in pharma, chemical, glass & ceramics, cosmetics and pigment industries.Today, with its multiplicity of product range, OSCL has a strong export footing across various developing countries, comprising Europe, Asia, North America, South America and Australia.”

“Omkar speciality has reported a flat performance for the Q2FY13, which was inline with our expectations. Topline was down by merely 2% to Rs 50.68 Cr on YoY basis. EBITDA also witnessed a degrowth of around 5% from Rs 9.96 cr to Rs 9.50 Cr which was mainly because of higher operating expenses WTO higher raw material prices, hence EBITDA margins stood at 18.7% vs 19.3% and we expect this to grow further on the back of increasing export revenues from the new capacities. Profitability has grown on the back of Forex gain from Rs 4.88 Cr to Rs 5.89 Cr and margins stood at 11.6% and expect to remain in the range between 10-12% for FY13. Increase in export revenue helped Omkar to maintain growth: To keep the pace on, Omkar has lined up plans to launch 2-3 more export oriented products every quarter which will drive the revenue from export segment in FY13E & FY14E.”

“We believe Omkar is a good play in small pharma space for investors with a 1-2 year investment perspective. At the current market price of Rs 118, the stock is trading at PE of 9x times to its FY13E earnings. Considering the above rationale we expect the performance to translate healthy growth quarter by quarter. Omkar's portfolio have diversified products and diversified customer base which will keep the growth phase inline with the expansion plans. Hence we continue to remain positive and expect decent gains from the current levels. One can buy the stock with a target of Rs 131,” says Mehta Equities research report.

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