Unichem laboratories ltd

Unichem results have come out as a positive surprise more because the sales growth has come in at a hefty 25% plus if one looks at sales of 190 cr for q4 fy 12 and compare it with 241 cr for q4 fy 13. Net profit growth is even more impressive at around 35% at 31 cr as compared to 23 cr in q4 fy 12.

Biggest plus according to me is that the domestic sales growth seems to be picking up in a traditionally weak quarter. Sales in India increased from 118 cr to 147 cr which is a good jump.

the main concern regarding unichem till now was regarding its domestic sales being sluggish and now that seems to be getting addressed.

On the flip side, the subsidiaries continue to bleed and we will need to see what management has to say about them. I guess that should be the next on the list for management to address.

Hiking dividend to Rs 4.5 per share should send strong signals about company’s future. This is one company which is sitting pretty in terms of balance sheet strength even after expansions. And it is likely to get even better with infusion of funds to be received from Mylan from sale of the MP SEZ.

Exports momentum seems to be strong with sales outside india growing from 75 (q4 fy 12) to 96 crores. (q4 fy 13) .

All in all looking at the broader picture for Unichem for next couple of years, things look very good and stock seems a good buy at cmp and on any declines.

disc: It remains one of my top holdings and recommendation as mentioned many times before.

Hitesh Bhai,

Agree with you that barring the losses in the subsidiaries, the results are pretty good.

Thanks for a detailed analysis Hitesh. Growth is very decent overall. Once they bring back the subsidiaries on track, they should do very well. The annual report and some managementcommentary/confcall should throw light on what they are planning to do going forward.

I have been accumulating this between 158 to 175 range and it’s now second highest allocation in my portfolio.

ICICIDirect has recommended buy

http://content.icicidirect.com/mailimages/IDirect_UnichemLab_Q4FY13.pdf

Unichem latest conference call for FY13 result discussion is below:

http://www.researchbytes.com/Unichem-Laboratories-Limited-U0028.htm

CONFERENCE CALL

Unichem Laboratories

The company will grow better than the industry growth by about 200 bps in FY’14

The company held its conference call on 13th May’13 and was addressed by key management

Key highlights

After growing by about 15% in FY’13, Pharama industry, as per the management, grew by only 9% in April’13. Management expects the industry to grow by around 13% for FY’14 and Unichem laboratories to do better than the industry by about 200 bps.

As per the management, in past 8-9 months, the company had taken lot of avenues in terms of re-organization and re-alignment of products, manpower and this has resulted in better product mix, effective cost control and will benefit in FY’14 in terms of higher volumes and better productivity.

Both Acute and Chronic division are performing well. Also major sub divisions, within the group, have also started contributing. For example, UVA division which constitute about 53% of Acute division sale, grew by about 18% and CV division which constitute about 56% of Chronic division, grew by about 11%, higher than the market.

During Q4 FY’13, on standalone basis, net sales grew by 26% y.o.y. Domestic branded formulations grew by 28% y.o.y and international formulations grew by 29%. For FY’13, on standalone basis, net sales grew by 25% y.o.y. Domestic branded formulations grew by 19% y.o.y and international formulations grew by 56%.

Internationally, while it is difficult to project the growth due to business being contractual in nature, overall about 25% growth can be expected in FY’14.

Indore SEZ sale is yet to be approved by the Government bodies. If the sale goes through, the company will receive about Rs 150 crore.

The company has sufficient capacity for next 2 years, however for exports, if it gets some contractual business, then the land near the Goa plant will be used for expansions, which will costs around Rs 125 crore. Management also is looking out for some inorganic opportunities in Therapeutic space in domestic market.

On its subsidiaries business, for FY’13, the UK subsidiary reported sale of 10.77 M Pound and reported a profit of 0.10 M Pound as compared to a loss of about 0.19 M in pound in corresponding period last year. The US subsidiary, however continued to remain in loss although, loss being reduced from $ 0.75 M for FY’12 to about $ 0.60 M for FY’13. Higher losses are as a result of higher costs and lower volumes in US.

Brazil subsidiary also reported loss of about 2.97 M Reals and Ireland subsidiary, which was acquired in FY’13, reported loss of about 0.29 M Euro for period ended FY’13.

Management’s endeavor is to turn the Brazilian and Ireland subsidiary into profits by FY’14, while US will take some more time. In next couple of years, the subsidiaries will be in a position to contribute substantially in terms of margins and profits to the Parent.

For FY’14, management expects a further room of 150-200 bps margin improvement in standalone business. Product mix and cost control initiatives will ensure the same.

Overall tax rate including some deferred tax credit, will come to around 23%.

From Capital Market

http://www.researchbytes.com/Unichem-Laboratories-Limited-U0028.htm Link: http://www.researchbytes.com/Unichem-Laboratories-Limited-U0028.htm

All,

Is there a reason why Unichem share price has not moved either ways even after results which showed 33% increase in PAT?

The stock is where it is 6 months back while the markets have rallied.

low liquidity stocks stagnate when buying interest dries up once interest resumes they move up with venegeance.

Some more promoter buying from Prakash Mody of Unichem. announcement today on 17th may 2013 on bse.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/Unichem_Laboratories_Ltd_170513_SAST.pdf

There has been consistent buying by the promoter more so since jan 2013.

Any impact of forced price reduction by GOI for indian formulation cos as per recent newspaper report on Unichem?

if i remember correctly , in one of previous concalls company pegged the impact from new pricing policy to 10-15 crores , that could be a possible overhang on the stock price . But then again Alembic which should be impacted similarly or maybe more is making new life time highs.

Hitesh bhai,

Are you able to visualize any impact of the forced price reduction by the indian govt. on unichem? I think the next quarter results will be vital for this stock…if the subsidiaries start posting profits we are in for a great ride…

Both unichem and canfin seem to be great bets for a 18-26 months outlook…please provide your valuable feedback…

Regards,

Rajarshi

To add in this case the promoter holding for unichem already being > than 50% and still continuing to buy from the market is a strong signal…

I think the management does come out with some details on the impact of the govt policy on the company’s prospects in their latest concall. Their losar plain tablets fall under dpco. combinations again are out of dpco.

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Overall I think unichem should be well placed in next two years for strong growth.

According to rel sec the maximum EPS % of hit on FY2015E /

CY2014E is for Ranbaxy 8%, Cadila 5%, Cipla 5%, DRL 3%. Lupin, Glen, ipca, Sun, Unichem, Torrent and JBchem are betw’n 1 to 2%

Hitesh,

You had posed that Dr. Prakash Modys is buying back shares with BSE link.Is there any site where this type of information about buy backs or promotor activityis posted ? I did lot of googling but could not find such a site.

Nani,

Here is the link on moneycontrol -http://www.moneycontrol.com/stocks/stock_market/corp_notices.php?autono=676074

Mr. Prakash Mody also bought some stock yesterday. However, the market seems to be completely ignoring it.

Thanks Ankit for the Link.

Did Mr Mody buy stock yesterday? The notice seems to have repeated andis older one ( same one which Hitesh posted).

Hi Nani,

Ya both the link are same. Saw the same link on BSE’s site as well. There is some mistake from BSE/company’s end and either the BSE has released old information or the promoters haven’t bought more shares on 27th.

I am thinking of switching to torrent

Better growth, better portfolio, bigger size, better return ratio and cheaper valuations

Any views all?