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Dishman Pharmaceuticals and Chemicals 1QFY2015 performance highlights and results update

August 18, 2014, Monday, 16:34 GMT | 11:34 EST | 21:04 IST | 23:34 SGT
Contributed by Angel Broking


For 1QFY2015, Dishman Pharmaceuticals and Chemicals (Dishman) announced better-than-expected numbers on the sales front, but lower-than-expected OPM and net profit. The company posted a revenue of Rs.362cr (V/s an expected Rs.332cr), up 18.1% yoy. The OPM came in at 20.5% (V/s an expected 23.0%), a yoy dip of 730bp. The dip in the margin is on account of the 431bp dip in the gross margin and a 21.3% and 32.8% yoy growth in staff and other expenditure, respectively. The PAT for the quarter came in at Rs.24cr, a yoy de-growth of 18.6% yoy. We maintain our Buy rating on the stock with a price target of Rs.177.

Results better than expected on sales front: The company posted a revenue of Rs.362cr (V/s an expected Rs.332cr), up 18.1% yoy. The sales growth was led by the MM segment, which grew by 31.0% yoy, while CRAMS posted a yoy growth of 12.7%. The OPM came in at 20.5% V/s an expected 23.0% and V/s 27.8% in the corresponding quarter of last year. The dip in OPM is on back of the 431bp dip in the gross margin (71.1% V/s 75.4% in the corresponding period of last year) and a 21.3% and 32.8% yoy growth in staff and other expenditure, respectively. A higher depreciation expenditure during the period led the PAT to come in at Rs.24cr, a yoy de-growth of 18.6% yoy. This was much lower than the expected PAT of Rs.37cr, due to a higher-than-expected interest expenditure during the period.

Outlook and valuation: We expect Dishman’s net sales and net profit to come in at Rs.1,662cr and Rs.178cr, respectively, in FY2016. At current levels, Dishman is trading at 8.1x and 6.7x FY2015E and FY2016E earnings, respectively. We believe the current valuations are attractive, hence, we maintain our Buy recommendation on the stock with a price target of Rs.177.

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