Hold Unichem Labs; target of Rs 192: Emkay

Emkay Global Financial Services has recommended hold rating on Unichem Labs with a target of Rs 192 in its October 22, 2012 research report.

“Unichem’s Q2FY13 Results a) Revenues at Rs2.6bn (up 33% YoY) b) EBITDA at Rs529mn (up 74% YoY) and c) APAT at Rs365mn (up 91% YoY) Domestic business grew by 20% on back of low base, addition of MRs and strong focus on chronic therapies Going ahead –India business will grow above industry rate at 18% in FY13E & 16% in FY14E. Traction in CRAMS contract with US MNC will lead to 24% CAGR in export formulations”

“In the domestic market, we believe pain due to inventory rationalization is over. It has also started a new division for gynaec and dermatology with 150 MRs being added in FY13. We expect domestic business to grow by 16-18% CAGR over FY12-14E In the exports market, company initiated CRAMS supplies to MNC customer in Q3FY12. We expect this contract to generate revenues Rs1bn in FY13 o US business (contributes 5% to sales) to grow at 14% CAGR over FY12-14E. Unichem has filed 27 ANDAs of which 11 are approved & 8 are commercialized. Company has guided for 1-2 filing per quarter in the US market going ahead. Management has guided for domestic business to out-perform industry growth rate. Margins are expected to remain healthy in 2HFY13 & FY14E as well.”

“We expect Unichem to report 22% revenue growth in FY13E and 15% in FY14E. We expect EBIDTA margins to move from 13.7% in FY12 to 16.4% in FY13E and 17.6% in FY14E. Earnings will grow by 42% CAGR over FY12-14E. Maintain hold with a target price of Rs192. At current price, the stock trades at 15x FY13E EPS and 12x FY14E,” says Emkay Global Financial Services research report.

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