PINC Visit Note – Dishman Pharmaceuticals

Wait for plans to fructify

We met with Mr. VVS Murthy (CFO) of Dishman Pharma (Dishman) to understand the company and get some colour on the future strategies. Dishman's return ratios (RoCE 6%) and interest coverage ratios (2x) now stand amongst the lowest in the industry and remain a cause of concern. Going ahead, the company has announced future growth opportunities like 1) Extension of Eprosartan contract for three years with contract size of Euro100mn. 2) Commencement of supplies of new products from Unit IX 3) Vitamin D-3 facility (Unit-XIII) has recently commenced. Though the plans are interesting, one needs to wait and watch for the positive impact on earnings given the higher depreciation and interest costs. Dishman expects to reduce its current debt of Rs9.7bn by Rs1.5bn over the next two years, with plans to incur maintenance capex of Rs1bn in FY12. The company expects its margins and return ratios to improve going ahead as most of its new facilities would start contributing.

VALUATIONS

The stock has corrected by 75% in the last one year, one of the worst performers amongst the pharma space. The stock is currently trading at 4.7x and 3.3x FY12E and FY13E Bloomberg consensus earnings. We do not have any rating on the stock.

Source : Equity Bulls

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