Dishman Carbogen Amcis' Q3FY20 results (Outperformer) - Revs in line; EBITDAmiss
Q3FY20 result highlights
- Net revenues stood at Rs5.4bn inline with our est of Rs5.3bn. While CRAMS revenues stood at Rs4bn (20% yoy), the MM segment registered revs of Rs1.2bn. CRAMS India declined 33% yoy to Rs514m with 54% margins. Management cited deferral of orders in India and Netherlands to Q4 for revenue miss in this segment.
- GMs came sharply lower at 76.1% vs est of 82%. Employee cost came at Rs1.9bn (+8% yoy) as guided by the management earlier. Other expenses declined 1% yoy to Rs947m vs est of Rs959m
- EBITDA came at Rs1.25bn (-5.6% yoy) vs est of Rs1.5bn. EBIDTAM was 23.1% vs est 29.2% due to lower GMs. Overall, EBITDAM was impacted by relatively lower contribution of the higher margin India / Netherlands business. This should improve sharply in Q4 as per company guidance.
- Tax rate remained higher than est (35.2% vs est 28%) due to impact on DTA. PAT stood at Rs328m (-36% yoy) vs our est of Rs537m.
- Rs720m buyback commences from Jan 27, 2020.
Impact on financials: We have reduced our FY20E/21E EBITDA / EPS by 5.5/7% and 17/21% respectively.
Valuations & view
After establishing a strong core profitability base, Dishman is now aiming to step up its CRAMS revenue growth momentum. The company has already commercialized atleast 3 NCEs over last 3 years. Dishman has strong relationships various large global players and 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 should drive sustained profit growth over the medium term. Post the recent correction, the stock now trades at 3x EV/EBITDA FY21E. Maintain Outperformer, with a target price of Rs202 (6x EV/EBITDA FY21E / 14x FY21PER).
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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