Dishman Carbogen Amcis' Q4FY18 results (Outperformer) - Below est; business momentum intact
Q4FY18 result highlights
- Net revenues were down 15%yoy (flat qoq) to Rs4.5bn, below our estimates of Rs5bn; Both CRAMS and MM segments were lower yoy. FY18 revenue of Rs16.96bn is marginally lower yoy. Adjusted for the change in the accounting treatment for unrealized forex gains, revenues were marginally higher qoq.
- Other operating income was negative Rs10.6mn vs Rs289mn (realised forex gains of Rs175mn) in Q3FY18 and Rs471mn in Q4FY18.
- Led by lower revenues, reported EBITDA stood lower at Rs1.2bn (26.8%) vs our est of Rs1.4bn (28% margins). EBITDA was flat qoq
- Depreciation came in lower at Rs505mn (-11%/8% yoy/qoq) vs est of Rs588mn; other income was also higher than estimates
- Due to higher other income/ lower depreciation, PAT of Rs511mn (+22% yoy) was marginally higher than est of Rs480mn
Key positives: Higher other income and lower depreciation
Key negatives: Lower revenues and gross margins
Impact on financials: We have reduced our FY19/20 EBITDA / earnings by 6% / 9% and 5% / 11% to account for lower revenues.
Valuations & view
After establishing a strong core profitability base (640bps EBITDA margin expansion over FY15-FY18), Dishman is now aiming to step up revenue growth momentum also in coming years. Dishman has 15-16 projects which are close to commercialization with another 16-20 candidates in early Phase III across Carbogen and Indian facilities. This makes it one of the stronger pipelines amongst peers with the company hopeful of 2-3 new drugs getting commercialized every year. This high potential CRAMS pipeline coupled with low current profit base (FY18 CRAMS business EBITDA of ~$50m) can lead to sustained and meaningful profit growth over the medium term. Maintain Outperformer, with a target price of Rs390 (12x FY20E EBITDA).
Dishman Pharmaceuticals and Chemicals Ltd Formerly known as Dishman Pharmaceuticals & Chemicals LimitedDishman Carbogen Amcis Limited. Dishman Pharmaceuticals and Chemicals Limited, formerly Dishman Pharmaceuticals and Chemicals Limited, operates as an outsourcing partner for the pharmaceutical industry. The Company manufactures and supplies intermediates, fine chemicals and various products for pharmaceutical, cosmetic and related industries. The Company's segments include Contract Research & Contract Manufacturing (CRAMS), and Bulk Drugs, Intermediates, Quats, Specialty Chemicals and Traded Goods. The Company's CRAMS business segment caters to the requirements of multinational pharmaceutical companies across the world. The Company's product portfolio includes Active Pharmaceutical Ingredients (APIs), High Potent APIs, Intermediates, Phase transfer catalysts, Lanolin-related products, and Antiseptic and disinfectant formulations. Its business units include Generic API, Dishman Specialty Chemicals, and Dishman Care.
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