Dishman Carbogen Amcis' Q3FY19 results (Outperformer) - Another good quarter
Q3FY19 result highlights
- Net revenues stood at Rs4.8bn (+4%/7% yoy/qoq), above our estimates of Rs4.6bn led by higher other operating income of Rs516mn (Rs390m – realized forex gains) vs Rs153mn in Q2. While CRAMS revenues stood at Rs3.3bn (+1% yoy) and others stood lower at 0.93bn (-7%/11% yoy/qoq).
- GMs came stood at 85% vs 84.6%/ 77.5% in Q2FY19/Q2FY18 and our est of 81%. Other exp stood higher at Rs959mn (+6% qoq) vs est of Rs850mn and Employee cost too stood higher at Rs1.78bn (+12% qoq) vs est of Rs1.65bn led by bonus provision and Carbogen expansion. Expect quarterly run rate of Rs1.7bn going forward. Other expenses stood higher led by forex impact and increase in R&M cost
- EBITDA came at Rs1.33bn (27.7%) vs est of Rs1.26bn (26.8% margins).
- PBT of Rs745mn came higher vs our est of Rs647mn. Tax rate stood lower at 31% vs our est of 32%.
- Resultant reported PAT stood at Rs514mn (+22% yoy) vs our est of Rs440mn; Mgt indicated net forex impact of Rs40-50mn at PAT level
Key positives: Higher other operating income
Key negatives: Lower MM revenues
Impact on financials: We have maintained our estimates.
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 1-2 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 Rs323 (17x FY21E EPS / 9x EV/EBITDA (FY21E).
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