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
I just received an email response from the company. I will paste it verbatim:
"Thank you for the e-mail. Last week, Granules India, along with several other pharmaceutical companies, was named in a Times of India article about potentially having actions taken against them, including having facilities being closed due to pollution control regulations.____
First, this issue only has the potential to impact our Jeedimetla Facility, there are no issues at our Formulation Facility or Paracetamol API Facility. Granules is treating this matter seriously and we are working with our advocates through the proper legal channels. We are committed to being an eco-friendly Company through advanced manufacturing processes and responsible effluent treatment processes."
I had a talk with someone who follows the Dishman very closely. A new and good development is them developing supply contracts with some hospitals in Gujarat for supply of disinfectant that they produce. This could be a scalable opportunity if it succeeds. Currently it is in infancy.
Overall the view for the company was quite encouraging.
Centrum report also is quite informative about management interaction and other details.
As per my understanding by reading of one up in wall street, promoter’s share selling means nothing, as there can be 1000s of reasons why a promoter can sell share. However there is just one reason why promoter buy share, and hence that give a positive sign.
Total Income up 5.1% to 195.22 Cr from 185.72 Cr.
EBIDTA DOWN 12.4% to 18.47 Cr from 21.09 Cr.
Net Profit DOWN 27.3% to 5.81 Cr from 7.99 Cr.
EBIDTA margin is 9.5% v/s 12% (SQ-12) and 11.4% (DQ-11)
NET Profit margin is 3% v/s 4.6% (SQ-12) and 4.3% (DQ-11)
Total Raw material costs as a %ge to Income is 62.8% v/s 59.2% (SQ-12) and 61.8% (DQ-11)
Employee costs to Income is 7.9% v/s 8.2% (SQ-12) and 6.5% (DQ-11)
Manufacturing expenses to Income is 8.5% v/s 7.8% (SQ-12) and 6.7% (DQ-11)
Other expenses (Including Freight and R&D) to Income is 11.4% v/s 12.7% (SQ-12) and 13.7% (DQ-11)
Financial costs to EBIT is 36.9% v/s 28.2% (SQ-12) and 32.7% (DQ-11)
Tax Rate 32.8% v/s 28.2% (SQ-12) and 27.7% (DQ-11)
9M/Fy-13 v/s 9M/Fy-12:
Total Income up 20.2% to 559.99 Cr from 465.88 Cr (Fy/11-12: 653.97 Cr)
EBIDTA up 26.2% to 57.58 Cr from 45.63 Cr (Fy/11-12: 80.04 Cr)
Net Profit up 48.5% to 20.16 Cr from 13.58 Cr (Fy/11-12: 29.95 Cr)
To me what matters for granules in long term is when the doubling/tripling of PFI/FD capacity complete and starts contributing to the the bottom line (in FY14, 6 months from now). So granules is expected to give similar below-average result in next quarter too. The real increase in sales/profit will start showing from next to next quarter.
As long as the progress towards the same is intact, and there is not extra increase in debt/pledging of share, its a a hold, and accumulate slowly for me.The lower is goes, the better for salaried guys like me, who buy share at a regular interval.
Happy to see the stock down. Had tweeted on it. The co just did not bother to send a copy of its ip valuation and to me as an ip expert, the valuation ascribed by the co looks absurd and more wishful than real.
Caveat: my opinion may change if upon perusal ofte intellectual capital report and the hypothesis of its base are found worthy. As of now, onthe face of it, seems a case of management talking its stock up
Mr Krishna Prasad, MD of Granules today bought around 9.33 L shares (that’s almost 4.6% of shares OS) from open market. I believe this reinforces the tremendous faith of management in the company’s prospects. Have not seen such big promoter purchase at one go.
Had a small position of Granules, with the plan of adding more in future. But got fed up with fresh pledging by promoter, and sold all of it. It seems all those mega pledging was for mega-buy by promoter. Things are turning pretty interesting here.
The share has shown improving financials over last 4 quarters. That is consistent with the management promise during start of the year. Assuming it can repeat the performance in last quarter (results on 24th), the FY14 EPS stands at 38, which values the company at 7.7 times FY14 earnings inspite of a huge run. With improving sales and margins, an EPS of 50+ is easily possible next year. The gains from Actus aquisition and Ajinmoto Omnichem would also kick in very soon. I think The share has great potential over next 2 years, views invited.
Absolutely Gaurav.Took a trading position her,yesterday.Already knee deep in Pharma sector.I think the greater challenge for these smaller cos. is to be able to scale up & still not compromise on profitability or margins,too much.Ipca & Alembic seem to have done the same & its being reflected in their P/Es.Granules itself mentioned in its AR,how it is perceived to be in a ‘commodity’ business.That perception still seems to exist(10X maybe the celing),inspite of the runup…which has mostly been on the back of high EPS growth.Expecting good nos. in Q4 too.And you are right,it is still cheap.
Great nos. again.
EPS - 11.68
Sales - 317 crores
NP - 23.62 Cr.
Dividend of Rs.3.5/share.
Annual Sales are above 1000cr.The stock is now trading only at 8X TTM or thereabouts,calls for re-rating & some short-term spike.
.Fundamentals of this company are intact. I am expecting a breakout soon.