Buy Dishman Carbogen Amcis; target of Rs 380: HDFC Securities

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HDFC Securities' research report on Dishman Carbogen Amcis

While Dishman’s (DCAL) 3Q performance was ahead of our estimates, revenue growth was muted as a large chunk of orders was shifted over to 4Q. Despite revenue growth being limited to 4/7% YoY/QoQ, a shift in business mix towards high-margin segments (CRAMS India and Vit. D) led to a 750bps YoY expansion in gross margin (up to 85% in 3Q) and a 10% YoY growth in EBITDA (despite higher opex), with margin at 27.7% (+136bps YoY). Lower tax rate at 31% further boosted PAT, which stood at Rs 514mn, up 22/17% YoY/QoQ. Having achieved Rs 14.1bn revenues and 27.1% EBITDA margin (+800bps YoY) in 9MFY19, we expect DCAL to deliver 13% plus rev. growth and 27.5% plus margin for FY19 post a bumper 4Q.

Outlook

The key near-term triggers include the successful launch of Nuzyra in the US in Feb-19, positive phase 3 data for Crenolanib in 1HCY19 and 1L maintenance indication for Niraparib in ovarian cancer. Maintain BUY with a TP of Rs 380 (15x Dec-20E EPS).

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