Hold Unichem Laboratories; target of Rs 214: ICICIdirect

ICICIdirect.com has recommended to hold Unichem Laboratories with a target price of Rs 214, in its research report dated July 14, 2015.

July 16, 2015 / 13:32 IST

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ICICIdirect.com's report on Unichem Laboratories

Revenues grew 6.2% YoY to Rs 309 crore (I-direct estimate: Rs 286 crore) mainly due to ~8% YoY growth in domestic formulations to Rs 194.3 crore (I-direct estimate: Rs 167.4 crore) and 11.6% growth in export formulation to Rs 83.3 crore. US sales grew 58% YoY to US$7.38 million

EBITDA margins declined 121 bps YoY (up 802 bps QoQ) to 13.8% (I-direct estimate: 6.1%) due to the increase in operating expenditure. EBITDA declined 2.3% to Rs 42.7 crore (I-direct estimate: Rs 17.3 crore)

Net profit witnessed a YoY decline of 4.7% to Rs 28.8 crore (I-direct estimate: Rs 8.4 crore)

"Domestic formulation growth has shown signs of a recovery in Q1FY16. The management has also confirmed normalisation of the domestic business and expects double digit volume growth henceforth. However, given the new environment for the refined domestic formulations model, we await the sustainability of the current performance for at least a couple of quarters and improvement from thereon. Note that Unichem is still well short of the peak 20% EBITDA margins it used to enjoy in the past. We maintain that the performance of domestic formulations will determine the overall growth and margins improvement. The company also needs to be watched for multiple expansions as Unichem has remained a laggard due to a series of poor quarters. Export formulations, on the other hand, are likely to maintain the growth tempo on the back of incremental US filings and subsequent launches. We expect revenues, EBITDA, profit to grow at a CAGR of 17.4%, 65.3% and 60.6%, respectively, in FY15-17E. Our target price of Rs 214 is based on 10x FY17E EPS of Rs 21.4", says ICICIdirect.com research report.