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Indoco Remedies 3QFY2014 performance highlights and results update

January 31, 2014, Friday, 09:46 GMT | 04:46 EST | 14:16 IST | 16:46 SGT
Contributed by Angel Broking


For 3QFY2014, Indoco Remedies (Indoco) posted in-line numbers on the sales front, while the net profit came in below expectations, in spite of the OPM coming above expectations. The company posted net sales of Rs.188cr (in line with our expectation of Rs.187cr), registering a yoy growth of 25.4%. The OPM came in at 16.2% (vs our expectation of 14.6%), ie an expansion of 539bp. As a result, the net profit increased by 91.3% yoy to Rs.14cr. However, the same was lower than our expectation of Rs.17cr. We remain Neutral on the stock.
 
Net profit below expectation: Indoco Remedies posted in-line numbers on the sales front, while the net profit came in below expectations, in spite of the OPM coming above expectations. The company posted net sales of Rs.188cr (in line with our expectation of Rs.187cr), registering a yoy growth of 25.4%. The sales growth was mainly on back of exports which posted a yoy growth of 30.5%, while domestic sales posted a growth of 22.7% yoy. The OPM came in at 16.2% (vs our expectation of 14.6%), ie an expansion of 539bp. The expansion in the OPM was driven by a 382bp expansion in gross margins and robust sales of the company during the quarter. As a result, the net profit increased by 91.3% yoy to Rs.14cr. However, the same was lower than our expectations of Rs.17cr, on back of other loss of Rs.0.5cr vs a gain of Rs.3cr during the corresponding period of last year and due to higher taxation during the quarter.
 
Outlook and valuation: We expect net sales to post a 20.2% CAGR to Rs.906cr and EPS to post a 32.7% CAGR to Rs.8.1 over FY2013-15E. At CMP, the stock is trading at 20.2x and 14.7x FY2014E and FY2015E earnings, respectively. We recommend a Neutral rating on the stock, given the valuations.