Post our last update on Dishman, let’s revisit the
turnaround story again. Most of the optimism has been turned into pessimism especially
on following counts:
- Continued high pledging from promoters ( rising consistently over the last 4 quarters as the stocks plummeted)
- Management ineffectiveness in selling of the SEZ land and debt reduction from that front.
- China facility continues to bleed. Dishman has strong intention to sell off the unit, though it continues to operate it till it finds a suitable buyer, and bear the losses.
Let us look at how the company fared on the number’s front.
Post FY12, we now have a full year’s numbers, let’s see how
the company did
FY 08
|
FY 09
|
FY 10
|
FY 11
|
FY 12
|
FY13
|
|
Sales Turnover
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
Raw Materials
|
39%
|
30%
|
30%
|
38%
|
35%
|
30%
|
Other Expenses
|
10%
|
20%
|
18%
|
14%
|
18%
|
20%
|
Employee Cost
|
26%
|
25%
|
27%
|
27%
|
26%
|
28%
|
EBITDA
|
25%
|
25%
|
25%
|
21%
|
21%
|
23%
|
Interest & Financial Charges
|
4%
|
5%
|
4%
|
5%
|
6%
|
6%
|
EBDT
|
21%
|
21%
|
21%
|
15%
|
15%
|
18%
|
Depreciation
|
6%
|
6%
|
6%
|
7%
|
7%
|
7%
|
Profit Before Tax
|
15%
|
15%
|
15%
|
9%
|
8%
|
11%
|
Tax
|
0%
|
1%
|
2%
|
1%
|
3%
|
4%
|
Profit After Tax
|
15%
|
14%
|
13%
|
8%
|
5%
|
8%
|
So as we see the company has course corrected post FY12, point to note is the improved margins at EBITDA level, reduced finance costs and the improvements hitting the bottom line with NPM rising to FY11 levels of close to 8%.
One quick look at the SHP, it cautions us about the increasing pledge from the promoters, while at the same time, the turnaround is getting traction seen from increasing stake from FII ( up from 3.29% to 9.1% in a year)
Shareholding Group
|
Mar-13
|
Dec-12
|
Sep-12
|
Jun-12
|
Mar-12
|
Promoter and Promoter Group
|
61.37%
|
61.36%
|
61.36%
|
61.36%
|
61.36%
|
Pledged (as a %age of Promoter Holdings)
|
17.72%
|
9.65%
|
7.82%
|
6.00%
|
4.99%
|
FII
|
9.10%
|
8.40%
|
6.41%
|
3.17%
|
3.29%
|
DII
|
6.15%
|
6.05%
|
6.42%
|
7.11%
|
6.40%
|
Bodies Corporate
|
9.24%
|
10.21%
|
11.74%
|
13.85%
|
15.90%
|
Retail
|
14.14%
|
13.98%
|
14.07%
|
14.51%
|
13.05%
|
Year to March (INR Crs.)
|
FY12
|
FY13
|
YoY Growth
|
Net Revenues
|
1124
|
1272
|
13%
|
( - ) Materials Cost
|
385
|
376
|
-2%
|
Gross Profit
|
739
|
896
|
21%
|
( - ) Employee Expenses
|
294
|
351
|
19%
|
( - ) SG &A Expenses
|
221
|
255
|
15%
|
EBITDA
|
224
|
290
|
29%
|
EBITDA margin
|
19.93%
|
22.80%
|
|
( - ) D&A
|
77
|
84
|
9%
|
EBIT
|
148
|
206
|
39%
|
Other income
|
13
|
18
|
38%
|
EBIT incl. other income
|
161
|
224
|
39%
|
( - ) Net finance expense
|
73
|
79
|
8%
|
Profit before tax
|
88
|
145
|
65%
|
( - ) Provision for taxes
|
31
|
45
|
45%
|
Adjusted net profit
|
57
|
100
|
75%
|
Basic shares outstanding
(Cr)
|
8.07
|
8.07
|
0%
|
EPS
|
7
|
12.4
|
77%
|
For the whole year the company has posted 13% sales growth which has reflected to a whopping 75% growth in net profits thanks to margin levels like CRAMs business from Carbogen Amcis ( Margins recovered to 16.4% from 7.7% earlier) and also the high margin Vitamin D business (registered 43% growth).
Revenue Split ( INR Cr)
|
FY13
|
FY12
|
YoY Growth
|
CRAMs (64%)
|
813.26
|
716.46
|
14%
|
Indian CRAMs
|
336.10
|
319.46
|
5%
|
Carbogen Amcis
|
477.20
|
397.00
|
20%
|
Marketable
Molecules (36%)
|
454.31
|
405.60
|
12%
|
Vitamin D
|
243.40
|
170.59
|
43%
|
Others
|
210.90
|
235.01
|
-10%
|
Looking ahead the company can see improvements from the following points
- Debt reduction : The company reduced debt by 100 Cr in FY13 to 818 Crs (Mar 2013) vs INR 916 crs (Mar 2012). The D/E reduced from 1.0x to 0.78x. There is only maintenance capex required for FY14 and FY15. Company plans to reduce 100 Cr of debt from cash flows, and another 100 Cr from SEZ land sale. Maintenance capex to the tune of 40 Cr is required for FY14.
- Improvement in cash conversion: Company need to maintain higher inventory days ~300 days thereby blocking capital. Its debtor days reduced to 38 days while payable days increased to 288 days reducing the cash conversion cycle further.
- Riding on Anti-Cancer drugs: Dishman has orders of $10-15mn for FY14 from Novartis, Merck and Astra Zeneca for anti-cancer products. Currently, the company operates two modules. Two more molecules are being added to contribute in FY14.
Year to March (INR Crs.)
|
FY13
|
FY14
|
YoY Growth
|
Net Revenues
|
1272
|
1,386
|
9%
|
( - ) Materials Cost
|
376
|
395
|
5%
|
( - ) Employee Expenses
|
351
|
393
|
12%
|
( - ) SG &A Expenses
|
255
|
286
|
12%
|
EBITDA
|
290
|
313
|
8%
|
EBITDA margin
|
22.80%
|
22.57%
|
|
( - ) D&A
|
84
|
94
|
12%
|
( - ) Net finance expense
|
79
|
63.2
|
-20%
|
Other income
|
18
|
18
|
0%
|
PBT incl. other income
|
145
|
174
|
20%
|
( - ) Provision for taxes
|
45
|
52
|
16%
|
Adjusted net profit
|
100
|
122
|
22%
|
Basic shares outstanding
(Cr)
|
8.07
|
8.07
|
0%
|
EPS
|
12.4
|
15.07
|
21%
|
The management expects an overall 9% sales growth with 10%
growth from Carbogen Amcis. Here the main pointers are towards cost control and
debt reduction. Looking at the robust operational cash flows + maintenance
capex only + proceeds from SEZ land sale ( And/Or disposal of China facility)
there can be savings in finance cost, and financial leverage to aid the bottom line.
At a FY14E EPS of 15.07 assuming a 8x multiple, one can look
at a one year forward price of 120+ by June 2014, which corresponds to a upside
of 85% in 1 year based on CMP of Rs 65 ( as on 11-Jun-2013)
Disclosure: Long positions.
