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Multi Baggers

Hem Securities

12.00 AM Aug 26th 2016

Neuland Lab

BSE ID : 524558     NSE ID : NEULANDLAB

RECOMMENDED PRICE 1024.10

PEAK FROM RECO 1680.00 64.05%

CURRENT PRICE 1040.00 1.55%

Neuland Laboratories Limited was established over 30 years ago and today is a publicly listed company headquartered in Hyderabad, India along with two overseas subsidiaries in USA and Japan. We initiate a ‘BUY’ on the stock with a target price of Rs 1280 with the medium to long term investment horizon.

Neuland Laboratories Limited

Neuland Laboratories Limited was established over 30 years ago and today is a publicly listed company headquartered in Hyderabad, India along with two overseas subsidiaries in USA and Japan. We initiate a ‘BUY’ on the stock with a target price of Rs 1280 with the medium to long term investment horizon.

Neuland Laboratories Limited, a pharmaceutical manufacturer providing active pharmaceutical ingredients (APIs), complex intermediates and custom manufacturing solutions services to customers located in around 80 countries.

The company has registered decent results for the quarter ending June 2016. The standalone revenues grew by 21% to Rs.149.77 crores vs. Rs.123.72 cr. in the year ago quarter. Operating profit grew at Rs.24.56 crores as against Rs.21.11 crores in the corresponding quarter last year; representing growth of 16.8%. The adjusted net profit surged sharply at Rs 9.71 crore as against Rs.7.30 crore, depicting a sharp growth of 33% y-o-y.

This quarter has been the best quarter for the company in terms of revenues coupled with sustained EBIDTA margins and profitability. The strong performance is a result of various transformational initiatives taken by the company over last few quarters.

The total operating revenues for the Q1FY17 account for 47% (66% for Q1FY16 and 51% for Q4FY16) from prime products, 29% (30% for Q1FY16 and 25% for Q4FY16) from niche APIs and the remaining 23% (4% for Q1FY16 and 23% from Q4FY16) from CMS business.

The Company is working on 10 projects (9 in Q4FY16 and 1 in Q1FY16) of which 6 are in commercial stage and remaining 4 being in the clinical stage.

Valuation

With change in business mix, focus on high margin value added segment, robust number of filings, preferred pure API player and wide geographical presence bodes well for growth of Neuland Laboratories Ltd. We believe the company is trading at an attractive valuation at 25.40x and 20.18x of consolidated FY17EPS of Rs.40.31 and FY18EPS of Rs.50.76. We initiate a ‘BUY’ on the stock with a target price of Rs.1280 (appreciation of about 25%) with the medium to long term investment horizon.

For full details, Click on the attachment.

Disclosure of Interest Statement - Company Name

1. Analyst Ownership of the Stock - No

2. Hem & its Group Company Ownership of the Stock - Yes

3. Hem & its Group Companies’ Director Ownership of the Stock - Yes

4. Broking relationship with company covered - No

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advise. Reader is requested to rely on his own decision and may take independent professional advise before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used the information prior to, or immediately following the publication. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Neuland_PYT_HemSec.pdf

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