Maintain Sell on Dishman Pharma - Visibility Remains Poor - Motilal Oswal

DISHMAN PHARMA: Mgmt expects additional annual revenue of Rs7.5b from new project/product pipeline; Visibility remains poor; Maintain Sell

The management estimates that the new project/product pipeline will start generating additional annual revenues of Rs7.5b by FY14.

We note that the additional revenue from new projects/products pipeline is an estimation of the Dishman management and not yet confirmed by customers.

In few other projects, though Master Service Agreement is in place, there is no assured supply agreement signed with customers for specific products.

Management has not given any timelines for the scale-up of revenue from the new project/product pipeline.

Dishman's India operations will benefit from increased outsourcing from India, given its strengthening MNC relations. However, the adverse business environment for CA and Euro depreciation will continue to impact earnings growth in FY11E and FY12E. RoE will continue to be below 10% till new facilities and CRAMS contracts ramp up. The stock currently trades at 22.3x FY12 and 11.4x FY13E earnings. We maintain Sell with target price of Rs89 (10x FY13E EPS).

Source : Equity Bulls

Keywords