Dishman Pharmaceuticals & Chemicals

• DPCL, a prominent player in CRAM space (Contract Research & Manufacturing) has put up an encouraging performance for FY2008. Consolidate Net Sales grew impressively by 38.8% to Rs.803.08 crore on back of 44.8% growth in its CRAM business to Rs.601.62 crore with increased revenue from Carbogen Amcis (CA). DPCL’s new API units have also commenced operations in January 2008. OPM% has declined marginally to 19% as increase in raw material costs and staff cost more than offset decline in other expenses. After providing for 88.7% higher interest cost of Rs.30.50 crore and higher depreciation of Rs.47.19 crore, PBT increased by 28.1% to Rs.122.77 crore and PAT spurted by 30.5% to Rs.119.71 crore.
• Dishman, an integrated CRAMs player, has gradually moved up value chain from being a chemical supplier to a CRAMs player, through both organic and un-organic growth initiatives. DPCL acquired CA (in August 2006), which provides drug development and commercialization services to global pharma companies. In addition to giving access to its client portfolio, some of Carbogen’s contract research pipeline presents commercialisation opportunity which offers significant growth potential in future. DPCL will leverage on CA’s exisiting relationships and pipeline to gain further traction in CRAM business. Dishman has also concluded its acquisition of Vitamin D and Vitamin D analogues division in Netherlands. It was already developing an intermediate of Vitamin D and post acquisition, it will enjoy vertical integration in a business which enjoys high margin.
• Solvay is the first and largest client for DPCL in the CRAM space. DPCL has recently got US FDA approval for its dedicated Eposartan Mesylate API facility, which will enable it to cater it to Solvay’s US requirement for EM also. DPCL has also completed installation of three API units, at Bavla facility, at around cost of Rs.150 crore. While the first plant’s capacity has already been sold, with Solvay augmenting the entire capacity. The other two plants would be with other major companies. Another facility, dedicated for cytotoxic and cytotoxic compounds, such as anti-cancer drugs, hormones etc. will be ready for commissioning before end of 2008.
Consolidated EPS for FY 2008 IS Rs.14.6, which is expected to go up to Rs.19.2 next year. DPCL is fully geared for a strong revenue and earnings growth in the years to come. Considering the bright prospects we recommend to buy the share at Rs.305.