Neuland Laboratories: Buy with medium to long term perspective for ~25% appreciation

Hem Securities | July 15, 2010, midnight


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.


  • 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.

 

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