Buy Divis Laboratories; target Rs 1250: Emkay
Emkay Global Financial Services is bullish on Divis Laboratories and has recommended buy rating on the stock with a target price of Rs 1250 in its November 5, 2012 research report.
November 06, 2012 / 13:47 IST
Emkay Global Financial Services is bullish on Divis Laboratories and has recommended buy rating on the stock with a target price of Rs 1250 in its November 5, 2012 research report.
"Divis Laboratories, revenues increased 34% to Rs4.7bn. Carotenoids sales, which is part of generic business, were at Rs240mn in Q2FY13 and Rs450 in H1FY13 against Rs820mn in FY12.Gross margins for the quarter expanded 660bps YoY and flat QoQ to 66% mainly due to Rupee depreciation.Adjusted for forex loss of Rs208mn, EBITDA margins expanded 350bps YoY to 39%. However QoQ margins contracted by 158bps due to Rs100mn increase in power cost led by power shortage in AP. The power shortage situation is expected to continue for the next 2-3 quarters.Adjusted for forex loss of Rs280mn in Q2FY13, PAT grew 26% YoY to Rs 1.34bn.Going forward, Company has revised downwards its growth guidance for H2FY13. Q3FY13 will be in-line with current quarter and Q4FY13 will remain flat YoY. No impact on our numbers but consensus earning estimates will correct by ~10% to Rs46 for FY13E & Rs57 for FY14ERevenues will grow by 20% in FY13 and 25% growth in FY14. EBITDA margins to remain at 38-39% on account of higher power cost in Andhra Pradesh due to supply shortage. There will be ~2-2.5% impact on EBITDA because of higher power cost.We expect Carotenoids business to clock revenues of Rs1.1bn in FY13E and Rs1.8bn in FY14EDivi’s continues to maintain strong performance in the CRAMS space vis-à-vis its peers in terms of best-in-class operating metrics. We expect Divi’s to report 16% growth in revenues in FY13E and 25% in FY14E. EBIDTA margins are expected to move from 37% in FY12 to 38.5% in FY13E and FY14E. Earnings will grow by 20% CAGR over FY12-14E on back of ramp-up in new capacity at Vizag. We maintain Buy on the stock with a target price of Rs 1250 (22x FY14EPS). At current price, the stock trades at 26x FY13E EPS of Rs46 and 21x FY14E EPS of Rs 57," says Emkay Global Financial Services research report.Institutional holding more than 40% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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