Dishman Pharmaceuticals

Crams major Dishman Pharmaceuticals has seen its sales grow 27 per cent CAGR during FY 2004-09, while its profits have grown by 37 per cent during this time. The company operates through four business segments or divisions which in addition to its core business of CRAMS, includes marketable molecules (MM) and its two acquisitions,

Dutch company Solvay’s vitamin business and Swiss-based Carbogen-Amcis (CA) which offers drug development and commercialisation services. While the prospects from this contract research business is good, the short term outlook is uncertain as pharma MNCs cut their R&D costs and restructure operations. Its Carbogen business which is being restructured saw a 41 per cent year-on-year drop in revenues in the December quarter to Rs 67 crore. Further, a 48 per cent decline in its MM division due to a plant shutdown (for FDA inspection) led to a 21 per cent dip in overall revenues for December 2009 quarter to Rs 222 crore. Its Solvay business barely grew in the quarter due to uncertainty post the merger with Abbot Labs. The management is targeting an overall revenue growth of 20 per cent in 2010-11 due to higher business from Solvay and Astra Zeneca, commencement of its Chinese operations and entry into the high potency drugs. The stock is down 14 per cent from the start of the year and considering that March 2010 quarter could also be weak, it could remain subdued. At Rs 207, the stock is trading about 11 times its 2010-11 estimated EPS of Rs 18.5. Investors could choose to buy at dips.