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Indoco Remedies Ltd Research Report - 04th Aug 2016

Pharmaceutical | Published on Aug 04th 2016

IT

For 1QFY2017, the company posted sales of Rs253cr V/s Rs220cr expected and V/s Rs216cr in 1QFY2016, a yoy growth of 17.0%. The formulations (Rs234.5cr) grew 14.8% yoy while API (Rs175.9cr) grew 40.8% yoy. On the operating profit front, the OPM came in at 14.7% V/s 16.3% in 1QFY2016 and V/s 17.0% expected. The dip in the OPM was mainly on back of 85.0% yoy rise in R&D expenses, which were around 4.7% V/s 3.0% in 1QFY2016. This led the company to post an Adj. net profit of Rs19.7cr V/s Rs20.8cr in 1QFY2016, a yoy de-growth of 4.9%. We maintain our Sell rating. Results lower than expected: For 1QFY2017, the company posted sales of Rs253cr V/s Rs220cr expected and V/s Rs216cr in 1QFY2016, a yoy growth of 17.0%. The formulations (Rs234.5cr) grew 14.8% yoy while API (Rs175.9cr) grew 40.8% yoy. Formulations growth was driven by domestic formulations (Rs142.1cr) which grew 12.7% yoy while export (Rs92.3cr) grew 18.4% yoy. On the operating profit front, the OPM came in at 14.7% V/s 16.3% in 1QFY2016 and V/s 17.0% expected. A dip in the OPM was mainly on back of 85.0% yoy rise in R&D expenses, which were around 4.7% V/s 3.0% in 1QFY2016. This led the company to post an Adj. net profit of Rs19.7cr V/s Rs20.8cr in 1QFY2016, a yoy de-growth of 4.9%. Outlook and valuation: We expect net sales to post a 14.9% CAGR to Rs1,289cr and EPS to post a 31.5% CAGR to Rs15.6 over FY2016-18E. At the current market price, the stock is trading at 23.7x and 20.1x its FY2017E and FY2018E earnings, respectively. We recommend a SELL rating.

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CMP 313
Target Price 225
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)2,373.79
MCAP NSE (Rs in Cr)2,368.72
P/E (x)28.81
EPS (Rs.)8.94
BV (Rs.)66.64
Div Yield (%)0.62
FV (Rs.)2.00
P/BV (x)3.87
EV/Sales (x)2.51
EV/EBITDA (x)15.61

Shareholding Pattern (%)

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

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