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Sushil Finance

5.30 AM Jan 1st 1970

Unichem Labs

BSE ID : 506690 NSE ID : UNICHEMLAB

RECOMMENDED PRICE 193.35

PEAK FROM RECO 467.00 141.53%

CURRENT PRICE 591.80 Resource id #12

Unichem Laboratories

We maintain our positive outlook on Unichem Laboratories and recommend a BUY rating with target price of Rs 260. The company has announced receiving ANDA approval for Amlodipine Besylate tablets from US-FDA. Company's Roha plant is already running at 100 percent and Pithampur facility has come up over 60 percent-70 percent.

Q2 FY14 Result Highlights

The net sales and operating income from domestic markets remained flat on sequential basis, and registered a moderate growth of 1.9 percent on an annual basis. The revenues from international markets comprised 32.9 percent during the quarter, growing 4.9 percent QoQ and 1.8 percent YoY to Rs.886.7 mn.

The Management believes, there was a slight delay of about a few months on account of shifting. Once the Company gets back on track, they should be able to file average one or two ANDAs each quarter, going forward, for the next two to three years. Of the total 15 approvals, 10 products have been commercially launched in US and 2 are tentative approvals and 1 product will be launched in this quarter.

The Company has already seen the full impact of NLEM in Q2 FY14; the total impact in absolute terms has been restricted to Rs.53.4 mn.

On the margins front, the Management is of the view that the EBITDA margin can easily be improved 200 basis points every year, primarily driven by field force productivity and the efficiencies on the manufacturing side; so next fiscal, the EBITDA margins should at least be 20.0 percent as compared to 18.5 percent during the current fiscal.

The Company is currently facing the capacity constraints for Active Pharmaceutical Ingredient (API), Roha plant is already running at 100 percent and Pithampur facility has come up over 60 percent-70 percent. The Company is currently expanding this facility which would be ready over the next 6 months.

The other income included exchange gain of Rs.40.8 mn during the quarter as against Rs.52.2 mn in Q1 FY14 and NIL in Q2 FY13; Similarly, the other expenses included exchange loss of NIL in Q2 FY14 as compared to NIL in Q1 FY14 and Rs.21.0 mn in Q2 FY13.

The net worth increased from Rs.7,991.3 mn on September 30, 2012 to Rs.8,859.9 mn as on September 30, 2013; the overall borrowings increased from Rs.252.3 mn to Rs. 396.7 mn during the same period. The Company holds cash and cash equivalents of Rs.187.4 mn at the end of Q2 FY14.

On October 24, 2013, the Company announced receiving ANDA approval for Amlodipine Besylate tablets from US-FDA. These tablets in 2.5 mg, 5.0 mg and 10.0 mg are therapeutically equivalent to NORVASC (Registered trademark) tablets of 2.5 mg, 5.0 mg and 10.0 mg from Pfizer Inc. It's a calcium channel blocker indicated for the treatment of hypertension, to lower blood pressure. The product will be commercialized from the Company's Goa plant; the API used for this ANDA is also made in-house at the Company's Roha plant. Currently, there are 6-7 companies which dominates the US market and the market size is around USD 45-50 mn.

On October, 25, 2013, the Company announced receiving the full consideration amount (Rs.1,605.0 mn); earlier, in February, 2013 the board of directors had approved the sale of Indore SEZ plant to Mylan Laboratories.

We recommend a BUY with target price of Rs 260. We maintain our positive outlook for the Company and recommend a BUY rating for the stock.

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