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Dishman Pharmaceuticals & Chemicals 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Dishman Pharmaceuticals & Chemicals (Dishman) reported lower-than-expected results on the OPM and net profit fronts, while sales came in just in line with expectations. The sales and net profit came in at Rs.318cr and Rs.16cr, vs our expectation of net sales and profits of Rs.315cr and Rs.24cr respectively. On the positive side, the company posted a good top-line growth and a healthy OPM. We recommend a Buy rating on the stock.

Net profit in line with expectations: Dishman reported net sales of Rs.318cr for the quarter, reporting a growth of 19.7% yoy, just in line with our expectation of Rs.315cr. Segment wise, the CRAMS business grew by 23.8% yoy, whereas the market molecules (MM) business grew by 12.4% yoy to end Rs.109cr. Gross margin for the quarter contracted to 65.8% (66.8% in 3QFY2012). The OPM contracted to 17.8% (18.3% in 3QFY2012). This has led to the company reporting a net profit of Rs.16cr, ie almost same as in 3QFY2012 ( Rs.17cr).

Outlook and valuation: We expect Dishman’s net sales and net profit to come in at Rs.1,536cr and Rs.124.8cr, respectively, in FY2014. At current levels, Dishman is trading at 7.8x and 6.1x FY2013E and FY2014E earnings, respectively. We believe the current valuations are attractive, hence, we maintain our Buy recommendation on the stock with a target price of Rs.155.