UnichemLaboratories_Q1FY11

8/8/2019 UnichemLaboratories_Q1FY11

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July 23, 2010

ICICIdirect.com|Equity Research

Result Update

WHATS CHANGEDPRICE TARGET ..............................................................................Unchanged at Rs 486

EPS (FY11E) ............................................................... Changed from Rs 42.1 to Rs 41.6

EPS (FY12E) ............................................................... Changed from Rs 51.1 to Rs 49.8

RATING....................................................................... Changed from Strong Buy to Add

On trackUnichems (ULL) Q1FY11 results were in line with our expectations.Sales grew 11% YoY to Rs 186 crore (we expected Rs 197 crore) due to~11% YoY growth in the domestic business and ~12% YoY growth in

exports. In the domestic business, the top 3 brands viz. Ampoxin, LosarH and Losar continued to stage a robust performance. ULL reported 3%YoY net profit growth in Q1FY11 to Rs 33.4 crore (we expected Rs 33.5crore) on a standalone basis. EBITDA margin decreased 119 bps YoYfrom 27.1% in Q1FY10 to 25.9% in Q1FY11 but QoQ it improvedmarginally by ~7 bps. Although export formulations de-grew ~2% YoY,overall exports grew ~12% YoY on account of ~46% YoY increase inexports API. Niche Generics (100% UK subsidiary) clocked sales of 2.24million, contributing ~7% to the overall topline. We maintain our targetprice of Rs 486 on the stock with an ADD rating.

Highlights for the quarterDuring the quarter, domestic formulations grew at a lower rate of ~11%

YoY to Rs 147 crore. The Losar group (market leader) clocked sales in

excess of Rs 30 crore with 32% market share. The nearest competitor has

12% market share. However, the Ampoxin brand witnessed subdued

growth during the quarter. Higher API sales led exports revenues to

improve by ~12% YoY. The debt-equity ratio increased from 0.03 in

Q1FY10 to 0.04 in Q1FY11.

Valuation

ULL is poised to grow at 17% CAGR (on a consolidated base) over FY10E-

12E to ~Rs 1044 crore. We believe ULL is at an inflection point and will

likely witness robust growth numbers, going forward. The stock is

currently trading at 9.1x FY12E EPS of ~Rs 50. We estimate the fair value

of ULL at Rs 486 on an SoTP basis and assign an ADD rating on the stock,implying ~7% upside from current levels.

Exhibit 1:Performance Highlights(Rs Crore) Q1FY11A Q1FY11E Q1FY10 Q4FY10 YoY Gr.(%) QoQ Gr.(%)

Net Sales 186.5 196.9 167.6 171.6 11.2 8.7

EBITDA 48.2 46.9 45.4 41.5 6.3 16.2

EBITDA Margin (%) 25.9 23.8 27.1 24.2

Depreciation 6.6 5.9 5.2 5.6 25.6 18.3

Interest 0.3 0.3 0.0 0.1 733.3 257.1

Reported PAT 33.4 33.5 32.4 33.9 3.0 -1.6

EPS (Rs) 9.3 9.3 9.0 9.4 Source: Company, ICICIdirect.com Research

Unichem Lab (UNILAB)

Rs 455

ting matrix

ng : Add

get : Rs 486

get Period : 12-15 months

ential Upside : 7 %

y Financials

s Crore) FY09 FY10E FY11E FY12E

t Sales 735.2 765.5 895.2 1044.4

TDA 142.2 181.4 212.9 247.1

t Profit 108.2 132.9 149.9 179.4

uation summary

FY09 FY10E FY11E FY12E

S (Rs) 30.0 36.9 41.6 49.8

(x) 15.2 12.3 10.9 9.1

get PE (x) 16.2 13.2 11.7 9.8

to EBITDA (x) 11.6 8.8 7.1 5.9

ce to book (x) 3.4 2.9 2.4 2.0

NW (%) 22.3 23.3 22.1 22.4

CE (%) 23.2 25.7 25.9 26.2

ock data

rket Capitalisation Rs 1639.4 crore

bt (FY09) Rs 39.7 crore

sh (FY09) Rs 34.4 crore

Rs 1644.8 crore

week H/L 507/201

uity capital Rs 18.0 crore

ce value Rs 5.0

F Holding (%) 9.7

Holding (%) 2.6

ce Movement

800

300

800

300

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

150

300

450

600

NIFTY(LHS) Unichem (RHS)

alysts name

ddhant Khandekar

[email protected]

shish Thavkar

[email protected]


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ICICIdirect.com|Equity ResearchPage 2

Sales growth below expectationsULLs standalone revenues grew ~11% YoY to Rs 186 crore (below our

expectation of Rs 197 crore) on account of a subdued performance from

the domestic formulation and the export formulation business. We

attribute lower growth in the domestic formulation segment to poor sales

offtake during June 2010. Sales grew ~25% and ~18% during April and

May 2010, respectively. The companys flagship brand Losar continued to

stage exceptional growth of ~20% YoY. The exports business improved

by ~12% YoY to Rs 32.5 crore on account of 46% YoY growth in API

sales led by the flat formulations business.

Going ahead, we expect consolidated sales to grow at 17% CAGR over

FY10-12E to Rs 1044 crore on account of 15% CAGR in the domestic

business, 32% CAGR in the base business of exports and 15% growth in

its European subsidiary Niche Generics. We expect Niche Generics to

contribute Rs 1.3 and Rs 2.3 to EPS in FY11E and FY12E, respectively.

Exhibit 2:Revenue break-up (Rs Crore)STANDALONE Q1FY11 Q1FY10 YoY Gr (%) Q4FY10 QoQ Gr (%)

Domestic 154.0 138.5 11.1 139.2 10.6

Formulations 147.2 132.9 10.7 131.4 12.0

API 6.8 5.6 21.0 7.8 -12.9

Exports 32.5 29.1 11.7 32.3 0.3

Formulations 20.6 20.9 -1.5 20.4 0.9

API 11.8 8.1 45.8 11.9 -0.6

Net Sales 186.4 167.6 11.2 171.6 8.7 Source: Company, ICICIdirect.com Research

Exhibit 3:Brand-wise salesSales

(Rs Crore)

Market Share

(%) YoY Gr. (%)

Sales

(Rs Crore)

Market Share

(%) YoY Gr. (%)

Losar 140.0 30.8 20.5 25.0 30.7 20.4

Ampoxin 81.0 42.7 7.1 9.0 37.0 -31.2

Trika 38.0 25.6 14.8 7.0 24.8 5.1

Unienzyme 29.0 11.1 44.4 6.0 12.2 42.6

Telsar 28.0 8.7 59.1 6.0 9.4 77.1

TG-TOR 26.0 4 25.1 5.0 4.4 46.2

Vizylac 18.0 34.5 37.1 4.0 36.0 46.4

Metride 17.0 3.3 47.2 3.0 3.4 57

Corvadil 12.0 2.3 8 2.0 2.4 20.2

Clodrel 12.0 5.5 14.8 2.0 5.9 33.2

MAT May - 2010 April+May 2010

Source: Company, ICICIdirect.com Research


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EBITDA improves by ~6% YoYULL reported a contraction in the EBITDA margin in Q1FY11 by 119 bps

YoY due to an increase in consumption of raw material, staff cost and

other expenses. The EBITDA margin decline was also aided by the lower

contribution from the domestic formulation business to the tune of

~79%. Commissioning of new plants at Baddi and Sikkim also erodedmargin expansion.

Going ahead, a steady performance in the domestic business and

improvement in Niche Generics performance would likely aid the

consolidated operating profit to grow at FY10-12E CAGR of ~17%

clocking an EBITDA margin of ~24% in FY12E.

Exhibit 4:EBITDA margin trend

169.3 174.7 172.8 171.6186.4

45.4 46.3 45.9 41.5 48.2

26.8%

25.9%

24.2%

26.6%26.5%

0

20

40

60

80

100

120

140

160

180

200

Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11

22%

23%

24%

25%

26%

27%

Standalone sales, LHS (Rs Cr) EBITDA, LHS (Rs Cr) EBITDA margin, RHS


Net profit witnesses flat growth at ~3% YoYThe net profit for Q1FY11 witnessed flat 3% YoY growth at ~Rs 33.4

crore (we estimated Rs 33.5 crore). This was due to a 119 bps contraction

in the EBITDA margin and ~26% YoY increase in deprecation charges.

Increased tax provisioning due to higher MAT rate also prevented further

margin expansion. Niche Generics posted a loss of 0.06 million in

Q1FY11. We expect it to turn EPS accretive from Q2FY11E.

Going ahead, we expect the consolidated net profit to grow at FY10-12E

CAGR of ~16% to Rs 179 crore, clocking a net profit margin of 17.2% in

FY12E.

Exhibit 5:Common size P&L statementQ1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11

Net Sales 100.0 100.0 100.0 100.0 100.0

Depreciation 3.1 3.0 3.1 3.2 3.5

Interest 0.0 0.2 0.1 0.0 0.1

PBT 24.1 24.3 24.0 22.9 23.3

Tax (% to PBT) 20.0 19.9 18.9 13.7 23.1

Net Profit 19.4 19.5 19.5 19.7 17.9



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Valuation

Unichem Laboratories (ULL) is a significant player in the Indian midcap

pharma space. We like ULLs rich US pipeline of 15 ANDAs including

eight approvals and four launches. We expect a meaningful contribution

to the EPS from its 100% European subsidiary from FY11E onwards. Weexpect the Indian business to penetrate deeper into the chronic segment.

ULL is poised to grow at 17% CAGR (on a consolidated base) over FY10E-

12E to ~Rs 1044 crore. We believe ULL is at an inflection point and will

likely witness robust growth numbers, going forward. The stock is

currently trading at 9.1x FY12E EPS of ~Rs 50. We estimate the fair value

of ULL at Rs 486 on an SoTP basis and assign an ADD rating on the stock,implying ~7% upside from current levels.

Exhibit 6:Valuation MatrixSales

(Rs Cr)

Sales Gr.

(%) EPS (Rs)

EPS Gr.

(%)

PE

(x)

EV/EBIDTA

(x)

RoNW

(%)

RoCE

(%)

FY09 735.2 9.5 30.0 112.4 15.2 11.6 22.3 23.2

FY10 765.5 4.1 36.9 22.9 12.3 8.8 23.3 25.7

FY11E 895.2 16.9 41.6 12.8 10.9 7.1 22.1 25.9

FY12E 1044.4 16.7 49.8 19.7 9.1 5.9 22.4 26.2 Source: Company, ICICIdirect.com Research


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ICICIdirect.com Coverage Universe

Alembic Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code ALECHE CMP 60 FY08 1003.2 8.0 7.5 8.5 32.6 19.1

Target 46 FY09 1116.1 3.4* 18.2 10.2 14.0* 11.3

MCap 830.7 Upside (%) -23 FY10 1138.2 3.0 20.3 10.7 11.7 9.7

FY11E 1223.9 4.1 14.7 9.0 14.5 11.3

Biocon Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code BIOCON CMP 321 FY09 1608.7 12.0 25.1 20.3 11.4 13.2

Target 335 FY10 2367.8 14.7 20.7 13.6 12.4 15.6

MCap 6420.0 Upside (%) 4 FY11E 2668.5 17.2 17.6 11.5 13.2 16.7

FY12E 3039.6 20.4 14.9 9.6 13.9 17.6

Dishman Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code DISHPHA CMP 219 FY09 1062.4 18.2 12.0 9.3 20.9 13.6

Target 218 FY10 915.4 14.6 15.0 12.2 15.0 9.1

MCap 1767.3 Upside (%) 0 FY11 1075.3 19.6 11.2 9.3 17.1 11.1

FY12E 1256.5 21.4 10.2 7.8 16.4 11.9

IPCA Labs Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)Idirect Code IPCLAB CMP 294 FY09 1283.8 8.1 36.5 4.6 16.0 19.6

Target 311 FY10 1559.6 16.4 17.9 3.6 23.7 20.5

MCap 3675.0 Upside (%) 6 FY11E 1878.0 19.9 14.8 2.9 23.1 22.5

FY12E 2237.2 23.9 12.3 2.3 22.4 24.1

Piramal Health Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code NICPIR CMP 495 FY09 3281.1 15.1 32.7 19.9 24.0 17.7

Target 589 FY10 3671.1 23.1 21.5 15.7 28.3 18.8

MCap 10530.5 Upside (%) 19 FY11E 4102.8 25.3 19.6 13.5 25.4 20.9

FY12E 4633.3 30.5 16.2 11.5 25.3 22.7

Sun Pharma Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code SUNPHA CMP 1741 FY09 4271.4 88.1 19.8 18.6 25.9 28.5

Target 1644 FY10 4019.8 65.2 26.7 25.2 17.8 19.6

MCap 36059.2 Upside (%) -6 FY11E 4464.8 71.7 24.3 22.3 16.8 18.8

FY12E 5151.8 82.2 21.2 18.5 16.7 18.5

Glenmark Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code GLEPHA CMP 281 FY09 2093.0 7.7 36.7 21.1 19.4 16.4

Target 325 FY10 2484.9 12.2 23.1 15.1 13.9 14.6

MCap 7581.1 Upside (%) 16 FY11E 2927.1 15.9 17.6 11.6 18.6 17.7

FY12E 3390.1 21.7 13.0 9.2 20.9 20.3

Lupin Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code LUPIN CMP 1899 FY08 2706.4 49.8 38.2 37.9 31.9 22.2Target 2101 FY09 3775.9 61.3 31.0 26.0 35.6 23.6

MCap 16833.9 Upside (%) 11 FY10 4740.5 78.7 24.1 20.8 33.0 25.8

FY11E 5930.3 93.0 20.4 15.6 27.2 25.4

FY12E 6997.7 116.7 16.3 12.1 24.9 24.7

Unichem Labs Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code UNILAB CMP 455 FY09 735.2 30.0 15.2 11.6 22.3 23.2

Target 486 FY10 765.5 36.9 12.3 8.8 23.3 25.7

MCap 1639.4 Upside (%) 7 FY11E 895.2 41.6 10.9 7.1 22.1 25.9

FY12E 1044.4 49.8 9.1 5.9 22.4 26.2

Indoco Remedies Sales (Rs Cr) EPS (Rs) PE(x) EV/E (x) RoNW (%) RoCE (%)

Idirect Code INDREM CMP 430 FY09 350.6 25.6 16.8 12.0 11.3 10.9

Target 432 FY10 398.3 34.2 12.6 10.1 13.3 11.1

MCap 528.5 Upside (%) 1 FY11E 461.4 43.3 9.9 7.7 14.5 13.3

FY12E 530.9 49.1 8.8 6.5 14.3 13.8


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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them

as Strong Buy, Buy, Add, Reduce, and Sell. The performance horizon is two years unless specified and the

notional target price is defined as the analysts' valuation for a stock.

Strong Buy: 20% or more;

Buy: Between 10% and 20%;

Add: Up to 10%;

Reduce: Up to -10%

Sell: -10% or more;

Pankaj Pandey Head Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,

7th Floor, Akruti Centre Point,MIDC Main Road, Marol Naka,Andheri (East)

Mumbai 400 093

[email protected]

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UnichemLaboratories_Q1FY11

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