Indoco Remedies - 1QFY2017 Result Update - Angel Broking

For 1QFY2017, the company posted sales of Rs. 253cr V/s Rs. 220cr expected and V/s Rs. 216cr in 1QFY2016, a yoy growth of 17.0%. The formulations (Rs. 234.5cr) grew 14.8% yoy while API (Rs. 175.9cr) grew 40.8% yoy. On the operating profit front, the OPM came in at 14.7% V/s 16.3% in 1QFY2016 and V/s 17.0% expected. The dip in the OPM was mainly on back of 85.0% yoy rise in R&D expenses, which were around 4.7% V/s 3.0% in 1QFY2016. This led the company to post an Adj. net profit of Rs. 19.7cr V/s Rs. 20.8cr in 1QFY2016, a yoy de-growth of 4.9%. We maintain our Sell rating.

Results lower than expected: For 1QFY2017, the company posted sales of Rs. 253cr V/s Rs. 220cr expected and V/s Rs. 216cr in 1QFY2016, a yoy growth of 17.0%. The formulations (Rs. 234.5cr) grew 14.8% yoy while API (Rs. 175.9cr) grew 40.8% yoy. Formulations growth was driven by domestic formulations (Rs. 142.1cr) which grew 12.7% yoy while export (Rs. 92.3cr) grew 18.4% yoy. On the operating profit front, the OPM came in at 14.7% V/s 16.3% in 1QFY2016 and V/s 17.0% expected. A dip in the OPM was mainly on back of 85.0% yoy rise in R&D expenses, which were around 4.7% V/s 3.0% in 1QFY2016. This led the company to post an Adj. net profit of Rs. 19.7cr V/s Rs. 20.8cr in 1QFY2016, a yoy de-growth of 4.9%.

Outlook and valuation: We expect net sales to post a 14.9% CAGR to Rs. 1,289cr and EPS to post a 31.5% CAGR to Rs. 15.6 over FY2016-18E. At the current market price, the stock is trading at 23.7x and 20.1x its FY2017E and FY2018E earnings, respectively. We recommend a SELL rating.

Shares of INDOCO REMEDIES LTD. was last trading in BSE at Rs.314.85 as compared to the previous close of Rs. 314.1. The total number of shares traded during the day was 3915 in over 94 trades.

The stock hit an intraday high of Rs. 316.25 and intraday low of 313. The net turnover during the day was Rs. 1232814.

Source : Equity Bulls

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