Buy Natco Pharma, Pratibha Inds; hold Era Infra: AnandRathi
Brokerage house AnandRathi has recommended to 'Buy' Natco Pharma, Pratibha Industries and 'Hold' Era Infra Engineering with a target price of Rs 704, Rs 53 and Rs 150 respectively in its research reports dated August 20, 2013.
August 20, 2013 / 18:56 IST
AnandRathi's research report
Natco PharmaWe are positive on the company, considering its healthy pipeline of niche products in the US market, which would attract huge cash flows. In its base business, we expect it to register 11.1 percent revenue and 18 percent adj. PAT CAGRs over FY13-15. The company recently received a favourable verdict from the Federal Circuit Court regarding Copaxone (Glatiramer Aceate), which would most likely allow it to launch the product in May'14 with its partner Mylan, depending upon USFDA approval. We value the Copaxone opportunity at Rs 287 per share. The stock is trading at 20.7x FY14e and 17.4x FY15e base business earnings. We maintain Buy, with a revised target of Rs 704 based on 10x FY15e base business earnings and Rs 348 a share for the para IV pipeline in the US (earlier Rs 540). We have raised the value of para IV products to Rs 348 from Rs 141 earlier, considering favourable ruling in Copaxone case.Pratibha IndustriesIn 1QFY14, Pratibha Industries' revenue declined 21.2 percent yoy (down 5 percent qoq), following yoy contraction of 21 percent in the contract division (down 3 percent qoq) and 94 percent in manufacturing. Execution has slowed as most tunnel boring machines (TBMs) are being shifted to the new project. For 1QFY14, revenue dipped 21 percent and net profit slid 80 percent, yoy. EBITDA margin stood at 17 percent versus 16 percent in FY13. On the back of lower-than-expected results, we have lowered our revenue and PAT estimates. We retain Buy, with price target of Rs 53. Our target is based on 5x FY14e earnings, a 25 percent discount to other midcap construction companies' target multiples.Era Infra EngineeringEra's revenue, EBITDA and PAT were higher than our estimates on the back of strong EBITDA margins. A static order book (~Rs 95-110bn) and lower-than-expected order inflows are key concerns. However, the strong 19.6 percent OPM during 1QFY14 versus 19.1 percent a year ago is a key positive. We retain Hold, with a sum-of-parts-based target of Rs 150. This comprises construction at Rs 100 (at 8x FY14e PE) and BOT at Rs 50 (at 1x Jun'12 BV).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. 
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