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Last Updated : Oct 28, 2016 12:03 PM IST | Source:

Buy Unichem Laboratories; target of Rs 345: Dolat Capital

Dolat Capital is bullish on Unichem Laboratories has recommended buy rating on the stock with a target price of Rs 345 in its research report dated October 25, 2016.

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Dolat Capital's research report on Unichem Laboratories

2QFY17 result surprised us on the top line with a revenue growth of 19% YoY to Rs 3.6 bn, but missed our estimates on the bottom line with a decline of 11% YoY. The result indicates past focused efforts and rationalization paying in terms of revenue growth returning. Domestic market has seen a good traction with volume growth of 8-9% and price growth of 6%. Export business is also reflecting continuous higher double digit growth. However, the capacity commission of Goa plant and Pithampur plant stuffed the expanses line along with marketing spend on the OTC brand. Higher depreciation charge and tax rate coupled with lower other income led to a decline in bottom-line.

We expect the momentum in domestic as well as export business to sustain over coming one or two years. The improved performance in Niche generics and US subsidiary further adds support to the consolidated numbers. More focus on the higher value products and business rationalizations along with capacity addition to drive margin profile for the company. However, commissioning of the new plants is expected to put some pressure on expenses and add to depreciation charge in near term. Tax rate is expected to stabilize from FY18 onwards. We have a Buy rating on the stock with a target price of Rs 345 (17x FY18E). At the CMP of Rs 288 the stock trades at 21x FY17E EPS of Rs 13.6 and 14x FY18E EPS of Rs 20.4.

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First Published on Oct 28, 2016 12:03 pm
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