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Indoco Remedies Ltd Research Report - 02nd Feb 2016

Pharmaceutical | Published on Feb 02nd 2016

IT

For 3QFY2016, Indoco Remedies (Indoco)’ results were in line with our expectations on the sales front, while the net profit came in lower owing to a lower than expected OPM. The company posted sales of Rs255cr (V/s Rs257cr estimated), a growth of 19.6% yoy. The growth during the quarter came in through exports (Rs112.1cr) which rose 34.6% yoy, while domestic market sales grew 9.8% yoy to Rs141.9cr. On the operating front, the OPM came in at 15.4% V/s 18.3% in 3QFY2015 (and V/s an expected 16.5%). Thus, the net profit came in at Rs20.4cr V/s Rs21.6cr in 3QFY2015, a dip of 5.6% yoy. This is against our expectation of Rs25.4cr. Overall, we are Neutral on the stock. Results lower than expected: The company posted sales of Rs255cr (V/s Rs257cr estimated), a growth of 19.6% yoy. The growth during the quarter came in through exports (Rs112.1cr) which rose 34.6% yoy, while domestic market sales grew 9.8% yoy to Rs141.9cr. Exports growth during the period was aided by the regulated markets (Rs90.4cr) which grew 36.3% yoy and emerging markets (Rs139.0cr) which grew 32.6% yoy. On the operating front, the OPM came in at 15.4% V/s 18.3% in 3QFY2015 (and V/s an expected 16.5%). The margins declined owing to 30.7% and 76.3% yoy rise in employee expenditure and R&D expenditure respectively. Thus, the net profit came in at Rs20.4cr V/s Rs21.6cr in 3QFY2015, a dip of 5.6% yoy. This is against our expectation of Rs25.4cr. Outlook and valuation: We expect net sales to post a 19.6% CAGR to Rs1,199cr and EPS to post a 23.0% CAGR to Rs13.6 over FY2015-17E. At the current market price, the stock is trading at 34.3x and 23.7x its FY2016E and FY2017E earnings, respectively. We recommend a Neutral rating on the stock, given the valuations.

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CMP 323
Target Price
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)2,391.30
MCAP NSE (Rs in Cr)2,391.76
P/E (x)29.03
EPS (Rs.)8.94
BV (Rs.)66.64
Div Yield (%)0.62
FV (Rs.)2.00
P/BV (x)3.89
EV/Sales (x)2.54
EV/EBITDA (x)15.75

Shareholding Pattern (%)

Promoter59.0
Public & Others16.0
Foreign13.0
Institution9.0
Corporate3.0
Grand Total100.0

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