Indoco Remedies - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, Indoco Remedies (Indoco) declared lower-than-expected results, both on the revenue and the net profit fronts. On the sales front, the company posted a sales growth of 13.7% yoy, while on the net profit front, growth came in lower-than-expected, de-growing by 3.4% yoy. This was mainly on account of lower-than-expected sales and a lower-than-expected other income. The salient feature of the quarter was the domestic formulation segment which grew by 17.6% yoy during the quarter. We recommend Buy on the stock.

Results lower than expected: Indoco reported net sales of Rs.165cr (Rs.145cr in 2QFY2012), up 13.7% yoy, lower than our expectation of Rs.178cr for 2QFY2013. The growth for the quarter came in mainly on the back of domestic business, which grew by 16.9% yoy. The domestic formulations, grew by 17.6% yoy. Gross margin came in at 58.4%, in line with expectations. Also, the OPM came in at 15.4%, just in line with expectations of 15.7%, expanding by 298bp yoy. The net profit for the quarter came in at Rs.12.1cr, 19.9% below our estimate of Rs.15cr.

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.63, the stock is trading at 8.6x and 7.1x FY2013E and FY2014E earnings, respectively. We recommend Buy on the stock with a revised target price of Rs.89.

Source : Equity Bulls

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