Indoco Remedies Ltd. - Q2 FY14 Result - Quick View - CMP Rs.107, Maintain HOLD for increased target of Rs.124 - Sushil Finance

The domestic formulation business registered a growth of 10.1% YoY to Rs.1,206.2 mn as against the industry average of 2.8% and the domestic API business witnessed a growth of 32.3% YoY to Rs.67.2 mn; thereby, the domestic revenues grew at 11.0% to Rs.1,273.4 mn. The international formulation business registered a robust growth of 34.4% to Rs.619.4 mn during the quarter; the regulated markets contributed Rs.534.0 mn growing at 28.3% YoY largely driven by strong contribution from the US, UK and South Africa, while the emerging markets contributed Rs.85.4 mn growing at 91.5% primarily driven by Kenya and Tanzania. The API's exports grew 51.6% YoY to Rs.55.2 mn. During the quarter, the exports comprised 34.6% of the net sales of Rs.1,950.5 mn.

The therapeutic segments which performed well during this quarter are Stomatologicals, Gastro-Intestinal, Pain/Analgesics, Vitamins/Minerals/Nutrients, Ophthalmic, Gynaec and Anti-Diabetics. API Domestic business recorded revenues of Rs.67.2 mn for the quarter as against Rs.50.8 mn during the same quarter last year. The products which did well during the quarter are Febrex Plus Tab, MCBM 69, Glychek M Forte, Cital Liquid 100 ml, Cyclopam, etc. The Company launched Prichek M1 Forte tablet, Prichek M2 Forte tablet under anti-diabetic therapy, Senolin SF 25gm, Macuchek Forte capsules, Tuspel LS, Carmicide EZ drops and Carmicide EZ syrup.

Goa Plant II will be audited by EU authorities in Q3 FY14 which will pave the way for ophthalmic product filings and also fetch opportunities for ophthalmic contract manufacturing in all 28 countries in EU. The total number of patent applications filed as on date is 56, out of which 37 pertain to API processes and 19 pertain to finished dosages.

On receipt of USFDA approval, the Company will launch 2 ophthalmic products, thereby, marking the commencement of sales in US markets through ACTAVIS (Watson) partnership. Meanwhile, the shipment of the Company's own approved ANDA for solid dosages will commence in Q3 FY14.

During H1 FY14, the long term borrowings came substantially down to Rs.171.6 mn from Rs.273.9 mn in March, 2013; the overall borrowings stood at Rs.908.2 mn as on September 30, 2013 as compared to Rs.902.3 mn as on March, 31, 2013. The cash and cash equivalents stood at Rs.96.0 mn as against Rs.118.1 mn during the same period.

During our previous update (Q4 & FY14 Quick View, dated May 29, 2013) we had recommended a BUY at the price of Rs.62 for the target price of Rs.78. Subsequently, we changed our rating from BUY to HOLD on October 17, 2013 after the stock breached our target price. At current price of Rs.107, the stock has returned 72.5% since our previous result update. We maintain our HOLD rating for the stock as we continue to maintain our positive outlook for the business on account of continued outperformance anticipated by the company, thereby increasing our target price to Rs.124.

Source : Equity Bulls

Keywords