DISHMAN PHARMA -- ? flag formation

Stock Opportunities
1

attached chart shows a possible flag formation in dishman pharma.

results expected on 3 nov.

If as expected they turn out to be good then there could be fireworks.

comments put p in charts.


2

Thank You Hitesh Bhai,

Partially exited Ajanta yesterday at 414 and entered Dishman. Ajanta is 4% of the portfolio from 8% earlier.

Cheers

Vinod

3

I too loaded Dishman upto 2% of my portfolio.

4

How do we know that the pattern has failed? Stock price going below the lower channel of the flag??

5

yes if it breaks down below the lower channel then pattern fails.

6

Hi Hitesh bhai,

Even ignoring the technical trends Dishman seems to me a good turnaround case (with a target around 130-140). Please let me know if you disagree with it.

7

subash,

I think sharekhan has a buy report on this one from price of 101 and target of 140.

i had been following this one since 50 levels but stayed away bcos of debt and forex issues.

fundamentally it is a turnaround case as you say and targets are likely to be achieved but since the business is more complex to understand I tend to stay away.

8

My friend who mostly follows and understands pharma is loaded to his neck on this mostly averaging below 40-50. He has much higher long term target on this one.

Baliga has two pharma picks and one of them is dishman with target of 130-140.

As per the data collected from the stock exchanges, Dishman Pharmaceuticals & Chemicals, promoted by JR Vyas, is the biggest FII gainer of second quarter of 2012-13

This quarter results are key to establish consistent turnaround , higher margins etc.

9

All kinds of wild targets floating around from 107 to 160. No dearth of analysts tracking this one but I guess a lot of them have no clue when they send out quarterly updates.

http://www.smartinvestor.in/market/advice-141624-advicedet-Buy_Dishman_Pharma_for_a_target_of_Rs_160_LKP_Securities.htm

http://web.angelbackoffice.com/research/archives/fundamental/company_reports/Dishman-2QFY2013RU-021112.pdf

10
Conference Call/Capital Market
Dishman Pharmaceuticals
Unit 9 expects to generate USD 100 million with full capacity and all four cells operational
Dishman Pharmaceuticals recently announced the results for the quarter ended September 2012 and held a conference Call to discuss the results and future growth strategies. The key takeaways of the call are as follows.

Highlights of the Call:
  • The unit 9 is producing good number of products and has 5 orders in hand. It expectsUSD 6-7 million revenues contribution for the FY'13 and this to be much higher in the FY'14. The second cell in Unit 9 is to be operational in November 2012. It has space and plans for construction of 3rd and 4th cells in the same site but will go for it after the revenues from current cells reaching to the USD 25 million. At full capacity each cell will generate USD 25 million and entire plant will generate USD 100 million.
  • The Carbogenemics business extremely doing well witnessed the EBIDTA improvement and expects much better performance in the next fiscal also.
  • It has started supplies of Vitamin D3 regularly and expects larger consignments going forward. The margins are at 23-24% and further to improve going forward.
  • They are using China plant efficiently as the API from the Moula plant is transferred to this facility due to the capacity constraints. It expects the China facility would break even by this fiscal and to be profitable in the next year.
  • The Esposartan supplies are started and it expects to contribute Rs 70-75 crore this fiscal.
  • It plans to sell the SEZ located at Anand and expects Rs 100 crore and expects to recover the earlier investments made.
  • The Consolidated gross debt is at Rs 882 crore as on 30th September 2012. It expects to repay the Rs 105 crore in the FY'13 and out of this it has already repaid Rs 52 crore in the H1'FY 13.
  • It expects the revenues to be Rs 1200-1300 crore (conservative) for the FY'13 with EBIDTA margins of 22-23%.
11

Putting it in the right thread.

Centrum has come out with a management interaction and estimates revision report on dishman. I consider them to be among the most authentic of people tracking dishman. I have been expecting more such upgrades in a few months.

We expect DPCL to report 15% CAGR in net sales, 25% CAGR in EBIDTA and 55% CAGR in net profitover the next three years. We expect the EBIDTA margin to improve from 20.0% in FY12 to 22.2% inFY13 and to 25.3% in FY14. The EBIDTA margin is expected to improve further to 25.7% in FY15.

At the CMP of Rs119, the stock trades at 9.2x FY13E EPS of Rs13.0 and 5.7x FY14E EPS of Rs21.0. Weexpect the company to maintain strong growth in CA, vitamin D and Quats segments. We re-iteratea Buy rating for DPCL with a target price of Rs168 based on 8x FY14E earnings of Rs21.0.

We expect DPCL to report EV/EBIDTA of 4.4, EV/sales of 1.1 and P/BV of 0.8 for FY14. The company isexpected to report ROCE of 12.0% and RoE of 14.4% for FY14.

discl: Dishman is my top holding and I added more today

12

Hi Neeteesh,

The key short term trigger is the SEZ land sell off. The Centrum report suggests a valuation of 110-120 Cr (50 Cr in FY13 and balance 60-70 Cr in FY14). This will be a key step and will bring debt levels down, saving on interest cost and boosting margins.

A lot will depend on order inlfows over the next 2 quarter for FY14 and FY15 revenue visibility. Bulk manufacturing in the generic space is a step in proper direction to subside the revenue volatility.

However the key risk still are order execution and forex volatility ( mostly export revenues) hurting top line.

ps: Looking on above this is more of a manufacturing play ( CRAMS players actually are) rather than Pharma play.

disc: have long positions

13

From Capital Market:

Dishman Pharmaceuticals and Chemicals net profit declines 61.59% in the December 2012 quarter
Sales rise 3.16% to Rs 103.30 crore
Net profit of Dishman Pharmaceuticals and Chemicals declined 61.59% to Rs 5.75 crore in the quarter ended December 2012 as against Rs 14.97 crore during the previous quarter ended December 2011. Sales rose 3.16% to Rs 103.30 crore in the quarter ended December 2012 as against Rs 100.14 crore during the previous quarter ended December 2011.
Particulars Quarter Ended
Dec. 2012 Dec. 2011 % Var.
Sales 103.30 100.14 3
OPM % 33.36 30.80 8
PBDT 17.50 30.18 -42
PBT 8.52 22.27 -62
NP 5.75 14.97 -62
14

Finance cost which is around 1800 crs(approx) compared to 600 crs(approx) of previous quarter is the culprit.Clarifications are awaited from managementregardingthe high finace costs…Also promoter Mr Vyashas again pledged some shares although it is a very small % of his holding…this is the second time in a span of 2-3 weeks this has happened…these are not good signals…It would be prudent to exit this counter and go long in Ajanta/Unichem…

15
Conference Call from Capital Market
Dishman Pharmaceuticals
Expectsrevenues to grow by 10% for FY'14
Dishman Pharmaceuticals announced the results for the quarter ended December 2012 and held a conference call on 11th February 2013 to discuss the results and future growth strategies. The key takeaways of the call are as follows.

Highlights of the call:

  • On Consolidated basis, there is forex gain of Rs 7.8 crore in other income and forex loss of Rs 7 crore in the interest cost during the quarter.
  • It is about to sign agreement related to the one product with the DSM and also another product with J&J very soon.
  • In regards to the China, It has three options in hand â 1) Discussing with UK based buyer to sell the unit 2) Discussion going on with middle venture to sell the unit to others 3) developing the steroids by it. It expects some decision on the unit by next three months time.
  • There is marginal revenue of Rs 17-20 crore from the China unit during the year.
  • On Generic API front 25 new patents has expired recently and also recruited 3 marketing people in this area.
  • It has already received approval for the 10 DMF's and 20 are in pipline expected to be filed once any enquiry from the customer as the US FDA fee has recently increased.
  • It is to sell the SEZ land and expected to recover the earlier investment of Rs 100 crore by the March 2013. This is expected to be utilized for the reducing the debt.
  • The Esposartan made Rs 25-27 crore during the quarter.
  • In general, the margins oncology products will be around 30+.
  • The CRAMS margins did well excluding the forex during the quarter.
  • The Brilinta is great disappointment for the Astrazenca and almost dead in the market.
  • The Capex expected to be Rs 40 crore for the FY'14.
  • It expects the CA business to make CHF 90-95 million for the FY'14 about to grow 10% over the current year. Further, it has indicated that it has robust order book, Manufacturing CRAMS and transferring the business to the lower cost of destination.
  • The Company expectsrevenues to grew by 10% to Rs 1400 crore (conservative) for the FY'14 on the back of good growth from the Generic business, Hypofacility and CA business.
  • The Vitamin D business expected to be Rs 300 crore by the FY'13 with an EBIDTA of 20%+
  • The Consolidated Debt is at Rs 800 crore and the Cash in hand is Rs 15 crore as on 31st December 2012.
  • On Consolidated basis, there is forex gain of Rs 7.8 crore in other income and forex loss of Rs 7 crore in the interest cost during the quarter.
  • It is about to sign agreement related to the one product with the DSM and also another product with J&J very soon.
  • In regards to the China, It has three options in hand â 1) Discussing with UK based buyer to sell the unit 2) Discussion going on with middle venture to sell the unit to others 3) developing the steroids by it. It expects some decision on the unit by next three months time.
  • There is marginal revenue of Rs 17-20 crore from the China unit during the year.
  • On Generic API front 25 new patents has expired recently and also recruited 3 marketing people in this area.
  • It has already received approval for the 10 DMF's and 20 are in pipline expected to be filed once any enquiry from the customer as the US FDA fee has recently increased.
  • It is to sell the SEZ land and expected to recover the earlier investment of Rs 100 crore by the March 2013. This is expected to be utilized for the reducing the debt.
  • The Esposartan made Rs 25-27 crore during the quarter.
  • In general, the margins oncology products will be around 30+.
  • The CRAMS margins did well excluding the forex during the quarter.
  • The Brilinta is great disappointment for the Astrazenca and almost dead in the market.
  • The Capex expected to be Rs 40 crore for the FY'14.
  • It expects the CA business to make CHF 90-95 million for the FY'14 about to grow 10% over the current year. Further, it has indicated that it has robust order book, Manufacturing CRAMS and transferring the business to the lower cost of destination.
  • The Company expectsrevenues to grew by 10% to Rs 1400 crore (conservative) for the FY'14 on the back of good growth from the Generic business, Hypofacility and CA business.
  • The Vitamin D business expected to be Rs 300 crore by the FY'13 with an EBIDTA of 20%+
  • The Consolidated Debt is at Rs 800 crore and the Cash in hand is Rs 15 crore as on 31st December 2012.
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    16

    Apologies… did not see the earlier post from Hemantji

    17

    thanks hemant for the regular concall updates.

    I think once the stock stabilises it could be worth looking at from a 1-2 year perspective. Things seem to be falling in place. If somehow the management starts focussing on reducing debt, dishman could be a great bet. Till then it will continue to be out of favor with markets.

    18

    Hello Hiteshji,

    On second observations, con call posted by Hemantji was for previous quarter result discussions… so i think i may have been hasty… :slight_smile:

    Anyways, being a newbie investori am trying to provide the updates so that seniors like u and Hemantji could concentrate on more important things… :slight_smile:

    Regards,

    Vishnu

    19

    The topline growth here is on expected lines. The next 2-3 years is going to be very difficult for Big Pharma and a boom time for CRAMS again.

    Divi’s Lab is the premium play here but it’s valuations are expensive. Prefer to stick with Dishman over Shashun or Jubilant Lifesciences

    The finance costs should come down, with SEZ land sell and interest rates going down. Moreover with top line maintained, and minimal capex, the margins rise should see a bottom line ramp up.

    Deloitte are there auditors, so I don’t believe the no. are fudged etc. However the growing promoter pledge is a concern.

    Disc: Invested.

    20

    Hi Rudra,

    With recent pledging-induced share crash of Zylog/CEBBCO, does it make sense to invest in a company like Dishman, at a PE of 12? I would ask a much stiffer margin of safety, i.e lower PE for such pledge-ladden company. I feel, current market gives way better opportunity at lower risk level, post the recent midcap fall.

    Regards,

    -Subash