Indoco Remedies - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Indoco Remedies (Indoco) declared lower-than-expected both - revenue and net profit. On the sales front, the company posted sales growth of 8.7% yoy, while on the net profit front, growth came in lower than expected, growing by 2.6% yoy. This was mainly on account of lower than expected sales and higher interest expenses during the period. While FY2013 was witness to lower sales growth, FY2014 is likely to witness a robust growth, both on back of exports and domestic formulations. We recommend Buy with a target price of Rs. 78.

Results lower than expected: Indoco reported net sales of Rs. 160cr (Rs. 148cr), up 8.7% yoy, but lower than our expectation of Rs. 176cr for 4QFY2013. The growth for the quarter came in mainly on the back of the domestic business, which grew by 10.8% yoy. The domestic formulations grew by 11.0% yoy, while exports grew by 5.7%. Gross margin came in at 60.2%, higher than expectations. However, the OPM came in at 16.7%, just in line with expectations of 16.9% due to lower than expected R&D expenses during the quarter. On a yoy basis, it expanded by 213bps. Consequently, the net profit for the quarter came in at Rs. 13.0cr, 43.3% below our estimate of Rs. 23cr.

Outlook and valuation: We expect net sales to post a 21.3% CAGR to Rs. 922cr and EPS to post a 29.8% CAGR to Rs. 7.8 over FY2013-15E. At CMP, the stock is trading at 10.3x and 8.1x FY2014E and FY2015E earnings, respectively. We recommend Buy on the stock with a target price of Rs. 78.

Source : Equity Bulls

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