Indoco Remedies - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Indoco Remedies (Indoco) declared lower than expected both on revenue and net profit front. On the sales front, the company posted sales growth of 20.2% yoy, while the net profit front, growth came in lower than expected, degrowing by 11.8% yoy. This was mainly on account of lower than expected sales and lower than expected OPM. The salient feature of the quarter was domestic formulation segment grew by 20.2% yoy during the quarter, whereas formulations exports increased by 22.7% yoy. We recommend Buy on the stock.

Results lower than expected: Indoco reported net sales of Rs.151cr (Rs.124cr), up 20.2% yoy, lower than our expectation of Rs.171cr for 1QFY2013. The growth for the quarter came in mainly on back of domestic and exports, which grew by 19.0% yoy and 22.7% yoy respectively. The domestic formulations, which accounted by 62.5%, grew by 20.2% yoy. Gross margin came in at 56.3%, higher than our expectations of 53.3%. Also, the OPM came in at 13.7%, just in line with the last year OPM's of 13.9%, but below our expectations of 15%. Net profit for the quarter came in at Rs.10.4cr, 27.5% below our estimate of Rs.14cr.

Outlook and valuation: We expect net sales to post a 21.3% CAGR to Rs.837cr and EPS to post a 32.8% CAGR to Rs.8.9 over FY2012-14E. At Rs.54, the stock is trading at 7.3x and 6.1x FY2013E and FY2014E earnings, respectively. We recommend Buy on the stock with a revised target price of Rs.82.

Source : Equity Bulls

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