ICICI Direct recommended hold rating on Indoco Remedies with a target price of Rs 195 in its research report dated January 31, 2019.
ICICI Direct's research report on Indoco Remedies
Q3FY19 numbers were higher than I-direct estimates on all fronts mainly due to better-than expected export formulation sales and margins. Revenues de-grew 5.6% YoY to Rs 262.6 crore (I-direct estimate: Rs 239 crore). Domestic formulations declined 2.2% to Rs 152.5 crore (I-direct estimate: Rs 155.9 crore). Export business declined 31.1% to Rs 68.5 crore (I-direct estimate: Rs 54.7 crore) EBITDA margins were at 9.4% against 15.5% in Q3FY18 (I-direct estimates of 7.2%) due to negative operational leverage. EBITDA declined 42.7% to Rs 11.8 crore (I-direct estimate: Rs 17.2 crore) Net profit was at Rs 5.3 crore against Rs 22.7 crore in Q3FY18 (I-direct net loss estimate: Rs 3.8 crore) due to lower operational performance.
Outlook
Accordingly, we value the stock on an SOTP basis by valuing the domestic business at 2.5x FY20E EV/sales, export formulations at 0.5x FY20E and API business at 1.0x FY20E EV/sales. We arrive at a target price of Rs 195.
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