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Indoco Remedies Q3FY14 results update

January 20, 2014, Monday, 06:50 GMT | 01:50 EST | 11:20 IST | 13:50 SGT
Contributed by Nirmal Bang

Indoco Remedies (IRL) reported above expectations results led by strong growth in international markets. Domestic business is still facing the impact of execution of NLEM policy in addition to regional specific issues like Telaganga matter in Andhra Pradesh, which is an important region for the company. However, it is normalized now and management is confident of achieving double digit growth in full year.
Key Highlights
- Net sales grew by 18.5% yoy to Rs 195 cr, beating the street expectations.
- EBITDA margins post R&D cost at 16.3% had seen improvement of ~50 bps qoq and ~ 220 bps yoy.
- The company is still awaiting approval for products file in partnership with Watson however, sounded confident of launching two products under Watson deal in 2HFY14 which has market share of $220 mn with 4-5 players.
- IRL has got USFDA approval of a diabetic solid dosage product and is launching it in Q3FY14. It’s a $100 mn product. This is IRL’s own product.
- EU authorities are expected to inspect Goa II plant in Nov which will pave the way for ophthalmic product filings and fetch opportunities for ophthalmic contract manufacturing in EU. The company is looking 5-6 dossiers filings before March’14
- IRL has MR strength of 2300 people and as indicated earlier has no plans to do any more additions, in order to increase productivity going forward. It has launched seven products (including line extensions) in domestic market during the quarter.
Valuation & Recommendation
The management has maintained its FY15 guidance of Rs 1,000 cr revenue and expects 2HFY14 to be better as 1HFY14’s delayed revenues would bunch up in the period. We have marginally tweaked our numbers in the light of delayed approval for Watson products. We maintain our BUY rating on the stock with price target of Rs 107 (11x of FY15E EPS), a potential upside of 36% over 18 months