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Research
BUY Unichem Laboratories - Steady progress continues: AnandRathi Institutional Research
Posted On : 2016-07-31 19:58:13( TIMEZONE : IST )
Unichem Laboratories - Steady progress continues; Buy with a target price of Rs 351:
We are positive about Unichem's long-term growth story and retain our Buy on the stock with a revised price target of Rs.351. We raise our FY17e and FY18e PAT respectively 12.8% and 13.4% to factor in the operating efficiency. Q1 FY17 revenue and adj. PAT are largely in-line with our estimates.
Decent quarter. Unichem's Q1 FY17 revenue grew 9.3% yoy, to Rs.3.4bn, slightly below our estimate. Its gross margin was a steady 63%; however, the reported EBITDA margin, at 13.1%, declined 79bps yoy due to higher staff costs and other expenses. Other expense included a ~Rs.70m provision for the diminution in value of assets. Adjusting for this, the EBITDA margin was 15.2%, up 69bps yoy. Adj. PAT was steady yoy at Rs.302m, against EBITDA growth, due to lower other income and a higher tax rate.
Healthy revenue growth. Domestic formulations revenue grew 12.5% yoy, driven by better growth in the chronic segment. The yoy growth has been on an uptrend in FY16; however, it dipped in Q1 FY17, partly the effect of the high-base. Export formulations grew 16.7% yoy, driven by 30% yoy growth in the US business. API sales declined yoy due to greater captive consumption.
Change in estimates. We raise our FY17 and FY18 revenue estimates by 1%, considering niche generics to gain traction. We raise our EBITDA estimates respectively 11% and 11.7%, to factor in the greater operating efficiency. Accordingly, we raise PAT 12.8% and 13.4% respectively.
Valuation. We maintain a Buy from a long-term perspective, with a revised price target of Rs.351 (earlier Rs.309) based on 16x FY18e earnings.
Risks. Currency fluctuations and regulatory hurdles.
Shares of UNICHEM LABORATORIES LTD. was last trading in BSE at Rs.285 as compared to the previous close of Rs. 288.95. The total number of shares traded during the day was 12670 in over 400 trades.
The stock hit an intraday high of Rs. 291.85 and intraday low of 283.25. The net turnover during the day was Rs. 3647710.
