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Indoco Remedies Ltd Research Report - 17th Jun 2016

Pharmaceutical | Published on Jun 17th 2016

IT

Indoco Remedies (Indoco) results for 4QFY2016 have come in much below our expectations. The company posted a 20.5% yoy growth in sales to Rs255cr, although the same is lower than our expectation of Rs300cr. The growth was mainly driven by exports (Rs117.8cr), which grew by 43.8% yoy, while domestic sales (Rs136.3cr) rose 5.6% yoy. On the operating front, the EBDITA margin for the quarter came in at 12.7% V/s 18.4% in 4QFY2015. The reported net profit came in at Rs20cr V/s Rs18.8cr in 4QFY2015, registering a yoy growth of 6.7%. We recommend a SELL on the stock, on back of the valuations. Results lower than expected: The company posted a 20.5% yoy growth in sales for the quarter to Rs255cr, although the same is lower than our expectation of Rs300cr. The growth was mainly driven by exports (Rs117.8cr), which grew by 43.8% yoy, while domestic sales (Rs136.3cr) rose 5.6% yoy. Export sales were driven by a 47.3% yoy growth in Formulation exports (Rs110.5cr) while domestic formulation sales (Rs130.8cr) rose 6.4% yoy. On the operating front, the gross margin for the quarter came in at 67.7% V/s 67.6% in 4QFY2015, while the EBDITA margin came in at 12.7% V/s 18.4% in 4QFY2015.The reported net profit came in at Rs20cr V/s Rs18.8cr in 4QFY2015, i.e. a yoy growth of 6.7%. This was however lower than our expectation of a net profit of Rs35cr for the quarter. 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 21.3x and 18.1x its FY2017E and FY2018E earnings, respectively. We recommend a SELL, given the expensive valuations.

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CMP 282
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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