Nicholas Piramal, BUY
CMP= Rs331 Target = Rs400
Nicholas Piramal 3QFY08 PAT was in-line with our estimates.
Key highlights:
Net sales were up 12.8% YoY to Rs7.3b driven by a 15% growth for both its CRAMS and domestic formulations business. Revenue growth was lower than our expectation of 17% growth. Adjusted PAT grew by 40.5% to Rs778m partly boosted by fiscal benefits from tax-free zones.
CRAMS business gaining traction – Two new contracts have been commercialized from
We believe that NPIL’s CRAMS business is gaining increased traction with more products being added to its CRAMS portfolio. We expect NPIL to emerge as one of
the key players in the Indian CRAMS space. The proposed NCE de-merger will have a positive impact on NPIL’s financials and can also potentially unlock value for shareholders (albeit in the long-term). NPIL is currently valued at 19.8x FY09E and 16.3x FY10E earnings pre-NCE demerger. Adjusted for NCE demerger, the stock is valued at 14x FY09E and 12x FY10E earnings. We believe that valuations do not fully reflect the scaling up of the CRAMS business and the expected benefits from acquired companies. Maintain Buy with revised price target of Rs400 (pre NCE-demerger).
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