Prabhudas Lilladher recommended Hold rating on Indoco Remedies with a target price of Rs 219 in its research report dated June 25, 2020.
Prabhudas Lilladher's research report on Indoco Remedies
We maintain HOLD on INDR and wait for more visibility post Q1FY21E considering that this quarter is usually weak due to seasonality effect plus COVID scenario could possibly lead to a double blow. FY20 was a recovery and CAPEX phase for INDR given 1) Remediation work for its Goa facility 2) Expansion of API segment with Patalganga Unit 3) Restructuring of Domestic formulation and 4) Making a comeback in European market after facing regulatory issues.
Outlook
INDR’s revenue guidance for FY21E appears to be strong for US, Europe and domestic markets with Rs1.5bn, Rs2.2bn and 12-14% growth, but COVID-19 and high operating cost may weigh on EBITDA margin and guidance may perhaps be unmet. We maintain HOLD but reduce our TP to Rs219 (earlier Rs259) based on 17x (earlier 18x) of FY22E.We reduce our multiple to 17x seeing with uncertainly related to COVID and its acute business (80% of domestic formulation) in Q1FY21E.
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