Hold Unichem Laboratories; target of Rs 211: KRChoksey

KRChoksey report on Unichem Laboratories

"Total revenues showed muted growth of 3.2% YoY to Rs278crs on account of degrowth in domestic business due to focus on conversion of distributors to C&F agents, however export formulation business posted strong growth. EBIDTA degrew by 34% YoY to Rs 33 crs & EBITDA margins stood at 12% contracted by 660bps mainly due to lower gross margins which is contracted by 550bps on YoY basis impacted by lower domestic sales. After adjusting forex gain, APAT degrew by 34.8% YoY to Rs 21crs on back of lower operating performance. EPS during the quarter stood at Rs 2.3."

"We believe domestic growth, which is impacted in H1FY15 on back of NLEM implementation & focus on conversion of distributors to C&F agents will gradually improve from H2FY15. We believe margins will also remain under pressure till that time and hence will start improving gradually from FY16 onwards. However, new launches in US market will improve export formulation growth. We downgrade our rating to ‘HOLD’ from ‘BUY’ with target price of Rs 211 at Rs12xFY16E EPS after change in our earnings estimates," says KRChoksey research report.

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