Centrum's research report on FDC
FDC’s Q3FY17 revenues were flat at Rs 2.31bn. As per AIOCD AWACS MAT data-December’16, FDC’s revenues declined by 2.3%, compared to market growth rate of 7.2%. The company’s nine major brands are listed among the top 1,000 brands and contributed 46% to its revenues, indicating high dependence on these brands.
Outlook
We downgrade FDC to Hold from Buy rating, with a TP of Rs 220 (earlier Rs270) based on 17x March’19E EPS of Rs 13.0. FDC’s Q3FY17 results were below our expectations and were affected by demonetisation. FDC reported flat growth in revenues, 400bps decline in EBIDTA margin to 15.9% and a 32% decrease in net profit. Eight out of its top nine brands lagged market growth. Key downside risks to our assumptions are slower growth of its major brands and key upside risk is faster growth in the domestic market. We recommend a switch to Sanofi India or Granules India.
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