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Dishman Pharma: All round growth - Views on News from Equitymaster
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Dishman Pharma: All round growth
May 26, 2009

Performance summary
  • Revenues grow by 33% YoY in FY09, led by the robust performances of both its CRAMS and MM businesses.
  • EBDITA margins expand substantially by 5.7% due to a considerable fall in the raw material costs (as percentage of sales).
  • PAT grows by 21% YoY during the year. However, if one excludes the extraordinary income in FY08, growth in net profits stands at a robust 75% YoY.

Financial performance: A snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Net sales 2,421 2,931 21.1% 8,044 10,671 32.7%
Expenditure 1,971 2,189 11.1% 6,502 8,009 23.2%
Operating profit (EBIDTA) 451 742 64.7% 1,542 2,662 72.6%
Operating profit margin (%) 18.6% 25.3%   19.2% 24.9%  
Other income 33 (59)   84 -  
Interest 96 178 86.2% 305 459 50.3%
Depreciation 167 175 4.9% 472 629 33.3%
Profit before tax 221 330 49.5% 850 1,575 85.3%
Extraordinary item 119 425 256.3% 379 -  
Tax (58) (8)   13 107 704.0%
Profit after tax/ (loss) 398 763 91.6% 1,215 1,467 20.8%
Net profit margin (%) 16.4% 26.0%   15.1% 13.8%  
No. of shares (m)       79.7 80.7  
Diluted earnings per share (Rs)*         18.2  
P/E ratio (x)*         9.3  
(* on a trailing 12-month basis)

What has driven performance in FY09?
  • Dishman’s topline during the year grew by 33% YoY led by the robust performances of both its CRAMS and marketable molecules (MM) businesses. Growth in CRAMS (up 29% YoY) was largely driven by the contract with Solvay and other MNCs. Sharp depreciation of the rupee against the dollar was also instrumental in augmenting total revenues. The MM business witnessed an impressive 56% YoY growth due to an improvement in realisations and strong performance of the Vitamin D business acquired from Solvay. This strong growth in overall revenues was despite supplies of ‘Teveten’ to Solvay being impacted as the latter had undertaken inventory rationalisation of its product, which Dishman is supplying.

    Revenue break-up
      4QFY08 4QFY09 Change FY08 FY09 Change
    CRAMS 1,799 2,113 17.4% 6,016 7,774 29.2%
    (% of total sales) 74.4% 72.2%   74.9% 73.2%  
    Marketable molecules (MM) 518 813 56.7% 1,826 2,850 56.1%
    (% of total sales) 21.4% 27.8%   22.7% 26.8%  
    Others 102 -   188 -  
    (% of total sales) 4.2% 0.0%   2.3% 0.0%  
    Total 2,419 2,925 20.9% 8,031 10,624 32.3%

  • Dishman’s operating margins substantially improved by 5.7% due to the fall in raw material costs (as percentage of sales) from 36.4% in FY08 to 30.4% in FY09. The company also managed to keep its staff costs under control. As far as the PBIT margins of the business segments are concerned, while that of the CRAMS business declined from 21.7% in FY08 to 19% in FY09, the MM business witnessed a splendid improvement in margins from 5.6% in FY08 to 19.6% in FY09.

  • The bottomline grew by 21% YoY and was lower than the 73% YoY growth in operating profits. However, this was largely due to the extraordinary income received in FY08 which was not present in FY09. Thus, excluding this impact, net profits for FY09 grew by an impressive 75% YoY.

What to expect?
At the current price of Rs 169, the stock is trading at a multiple of 8.2 times our estimated FY11 earnings. Going forward, the company intends to reduce its dependence on the Solvay contract by signing contracts with new clients. The management envisages the current slowdown in the global economy as a positive indicator which will further bolster the case for outsourcing manufacturing and clinical work to India thereby benefitting companies such as Dishman. The company has signed two major contracts with Solvay the value of which is 30 m euros. Further, Dishman is in talks with a Japanese company for securing a project, while 2 major contracts bagged by Carbogen Amcis will start in FY10. However, currency fluctuations are likely to impact the bottomline given that the majority of its debt is foreign currency denominated. Overall we maintain our positive view on the stock.

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May 29, 2017 (Close)


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