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Unichem Laboratories - Restructuring exercise delivering results - ICICIdirect
Posted On : 2012-10-23 22:15:16( TIMEZONE : IST )
Unichem reported better than expected Q2FY13 numbers. Net sales grew by ~33% to Rs.261 crore (I-Direct Estimate: Rs.253 crore) buoyed by ~74% growth in exports, which constitute 33% of the net sales. Exports growth along with ~21% growth in the domestic formulations enabled the company to improve on the EBITDA margins front which improved by ~474 bps to 20% (I-Direct Estimate: 18%). Robust profitability at the operating level helped the company to post robust 83% growth in the net profit to Rs.35 crore (I-Direct Estimate: Rs.31.5 crore) despite higher tax outgo. In the backdrop of successful restructuring, we have upgraded the stock from HOLD to BUY with multiple up-gradation.
Indian formulations growth on the back of restructuring and lower base
Domestic Branded formulations grew by 20.7% Y0Y to Rs.172 crore driven by inventory rationalization during most part of FY12 which has brought down the channel inventory from ~90 days to less than 40 days at present. As per AWACS, the September quarter growth stood at 8.6% YoY as it is still reflecting the flow of old inventory in the channel.
Exports registered strong growth driven by both Formulations and APIs
Export formulations grew 76% to Rs.58.1 crore as it registered ~Rs.12 crore sales from CRAMS business for a US customer and benefited from favourable currency. It filed 2 ANDAs during the quarter taking total ANDA count to 27. Of which, it received final approval for 11 products and launched 8 drugs till date. It has identified 10 products for generic filing over the next 3 quarters.
Successful business overhaul warrants re-rating
We have upgraded FY13E / FY14E EPS by one rupee each on the back of improved visibility post restructuring of domestic branded formulations as reflected in the H1FY13 numbers. Other growth drivers will be- 1) incremental product launches in the US and 2) improved off-take by CRAMS vendors. We expect revenues, EBITDA and net profit to grow at a CAGR of 14%, 17% and 20%, respectively, in FY12-14E. We have updated our target multiple from 9x at Q4FY12 to 12x for future targets. Our revised target price is Rs.217, based on 12x FY14E EPS of Rs.18.1. We recommend BUY.
