The company posted better than expected results for 1QFY2017 with sales at Rs366cr V/s Rs350cr expected and V/s Rs400cr in 1QFY2016, a yoy de-growth of 8.5%. CRAMS (Rs258cr) posted a growth of 2.3% yoy and the Market Molecules other segment (Rs108cr) posted de-growth of 26.9% yoy. On the operating front, the EBITDA margin came in at 25.3% V/s 20.9% expected and V/s 25.4% in 1QFY2016. Thus, the Adj. net profit came in at Rs46cr V/s Rs32cr expected and V/s Rs40cr in 1QFY2016, a yoy growth of 13.7%. We recommend a SELL.
Results better than expected on all fronts: Company posted better than expected results for 1QFY2017 with sales at Rs366cr V/s Rs350cr expected and V/s Rs400cr in 1QFY2016, a yoy de-growth of 8.5%. CRAMS (Rs258cr) posted a growth of 2.3% yoy and Market Molecules (Rs108cr) posted de-growth of 26.9% yoy. Within CRAMS, Carbogen Amcis (Rs202.3cr) posted a yoy growth of 14.3%, CRAMS India (Rs42.1cr) posted de-growth of 37.0% and CRAMS UK (Rs13.5cr) posted a yoy growth of 62.4%. Market Molecules declined on back of Vitamin D (Rs62.6cr; a yoy de-growth of 28.4%), while the other segment (Rs45.7cr) posted a yoy de-growth of 24.8%. On the operating front, the EBITDA margin came in at 25.3% V/s 20.9% expected and V/s 25.4% in 1QFY2016. Thus, the Adj. net profit came in at Rs46cr V/s Rs32cr expected and V/s Rs40cr in 1QFY2016, a yoy growth of 13.7%
Outlook and valuation: We expect Dishman’s net sales and net profit to grow at a CAGR of 10.0% and 3.1%, respectively, over FY2016-18E. At current levels, Dishman is trading at 15.1x its FY2018E earnings. We believe the current valuations are expensive, given the restrained growth and low profitability; hence, we maintain our SELL rating on the stock.
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