Hold Unichem Laboratories; target of Rs 214: ICICIdirect

"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.

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