Dishman Carbogen Amcis' Q4FY19 results (Outperformer) - Strong operating performance
Q4FY19 result highlights
- Net revenues stood at Rs6.5bn (+44%/36% yoy/qoq), beating our estimates of Rs5.1bn a strong performance across all segments. While CRAMS revenues stood at Rs4.7bn (+40%/41% yoy/qoq), the MM segment grew to 1.4bn (21%/49% yoy/qoq).
- GMs came at 76.5% vs 85%/ 76.4% in Q3FY19/Q4FY18 and higher than our est of 75.4%. Employee cost came higher at Rs2bn (+15% qoq) led by bonus, pension provisions and Carbogen expansion. Expect quarterly run rate of Rs1.7bn going forward. Other expenses were also high qoq at Rs1.2b (+28%) partially due to Rs200m forex loss.
- EBITDA came at Rs1.7bn (40% yoy/28% qoq) vs est of Rs1.44bn. EBIDTAM was 26.1% vs est 28.2%.
- Resultant reported PAT stood at Rs758mn (+48% yoy) vs our est of Rs666mn; Mgt indicated net forex impact of Rs40-50mn at PAT level
- During FY19, Dishman booked Rs1.1bn realized forex gains in other operating income with nearly similar corresponding increase in costs
Key positives: Strong quarterly performance across all segments
Key negatives: Lower margins due to higher emp. cost
Impact on financials: Increase FY20/FY21 earnings by 5% / 4%
Valuations & view
After establishing a strong core profitability base (640bps EBITDA margin expansion over FY15-FY18), Dishman is now aiming to step up its CRAMS segment revenue growth momentum. The company has already commercialized atleast 3 NCEs over last 3 years. Further, it has another 15-16 projects which are close to commercialization with additional 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 (FY19 CRAMS business EBITDA of ~$60m) can lead to sustained and meaningful profit growth over the medium term. Maintain Outperformer, with a target price of Rs352 (18x FY21E PER / 9x EV/EBITDA (FY21E)).​
Dishman Carbogen Amicis Limited is an India-based contract research and manufacturing services (CRAMS) company. The Company is engaged in the process of research and development to late-stage clinical and commercial manufacturing. It operates through two segments: CRAMS and Others. The CRAMS segment is its contract research and manufacturing segment under the long-term supply agreements. The others segment is focused on bulk drugs, intermediates, quaternary ammonium compounds (Quats) and specialty chemicals and outsourced/traded goods. It manufactures phase transfer catalysts, intermediates, fine chemicals, and various products for pharmaceutical, cosmetic and related industries. It also manufactures and supplies a range of Vitamin D and Vitamin D analogues. It also manufactures cholesterol and lanolin related products for pharmaceutical, cosmetic and related markets. The Company operates through nine manufacturing sites in Europe, India, China and Saudi Arabia.
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