Indoco Remedies - 2QFY2016 Result Update - Angel Broking

Indoco Remedies posted lower than expected numbers for 2QFY2016. The company posted a 9.4% yoy growth in sales to Rs. 248cr V/s Rs. 272cr expected and V/s Rs. 226cr in 2QFY2015, on back of domestic and exports posting a growth of 1.2% and 23.6% respectively. On the operating front, the EBITDA margin came in at 15.5% V/s 20.9% expected and V/s 20.6% in 2QFY2015, on back of lower than expected sales and 28.3% yoy and 82.6% yoy rise in staff expenditure and R&D expenditure, respectively. The R&D expenditure during the quarter was 3.6% of sales V/s 2.2% of sales in 2QFY2015. Thus, the Adj. net profit came in at Rs. 22.6cr V/s Rs. 33.4cr expected and V/s Rs. 22.4cr in 2QFY2015, a yoy growth of 0.9%. The lower than expected net profit is on back of lower than expected sales and OPM. On back of valuations, we maintain our Neutral stance on the stock.

Results lower than expected: The company posted lower than expected numbers for 2QFY2016. The company posted a 9.4% yoy growth in sales to Rs. 248cr V/s Rs. 272cr expected and V/s Rs. 226cr in 2QFY2015, on back of domestic and exports posting a growth of 1.2% and 23.6% respectively. On the operating front, the EBITDA margin came in at 15.5% V/s 20.9% expected and V/s 20.6% in 2QFY2015, on back of lower than expected sales and 28.3% yoy and 82.6% yoy rise in staff expenditure and R&D expenditure, respectively. The R&D expenditure during the quarter was 3.6% of sales V/s 2.2% of sales in 2QFY2015. Thus, the Adj. net profit came in at Rs. 22.6cr V/s Rs. 33.4cr expected and V/s Rs. 22.4cr in 2QFY2015, a yoy growth of 0.9%. The lower than expected net profit is on back of lower than expected sales and OPM.

Outlook and valuation: We expect net sales to post a 19.6% CAGR to Rs. 1,199cr and EPS to post a 23.0% CAGR to Rs. 13.6 over FY2015-17E. At the current market price, the stock is trading at 32.4x and 22.4x its FY2016E and FY2017E earnings, respectively. We recommend a Neutral rating on the stock, given the valuations.

Shares of INDOCO REMEDIES LTD. was last trading in BSE at Rs.307.15 as compared to the previous close of Rs. 304.95. The total number of shares traded during the day was 3183 in over 436 trades.

The stock hit an intraday high of Rs. 308.5 and intraday low of 288.75. The net turnover during the day was Rs. 957244.

Source : Equity Bulls

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