DR. REDDY’S LABS
Reco price/date: Rs 1,619/June 6
Current/target price: Rs 1,614/Rs 1,857
Dr. Reddy’s Laboratories Ltd and Merck Serono SA (the biopharmaceutical division of Merck KGaA) have entered into a partnership to co-develop a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MABs). The partnership covers co-development, manufacturing and commercialization of the biosimilars across markets. Analysts view this development as a positive one. However, it is a long-term collaboration with no immediate financial impact on business. Edelweiss expects earnings momentum to decelerate from 29 per cent earnings CAGR (compound annual growth rate ) over FY11-13 to 10 per cent over FY13-15. Lower traction in earnings is largely driven by fewer launches in the US and contraction in core operating margins. Maintain Hold.
Reco price/date: Rs 89/June 6
Current/target price: Rs 89/Rs 107
Essar Ports’s revenues rose six per cent sequentially to Rs 288 crore and the Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin improved 257 basis points to 81.4 per cent in the March quarter. Profit before tax and exceptional items rose 13.3 per cent to Rs 69.7 crore. However, the company reported a one-time liability towards recognition of interest on corporate debt restructuring to the tune of Rs 235 crore and a deferred tax asset of Rs 125 crore due to unabsorbed tax losses. Thus, it reported a net loss of Rs 61.5 crore for the quarter. The company enjoys significant revenue visibility on account of long-term take or pay agreements with its anchor clients. Most projects are progressing well and operationalisation of the Paradip CQ3 berth in the current quarter (April-June) would generate higher volumes and catalyse growth in revenue and profitability. Maintain Buy.
Reco price/date: Rs 219/June 5
Current/target price: Rs 222/Rs 300
Analysts believe Repro India Ltd has strong revenue visibility as it caters to the education sector, improving margins due to rising economies of scale and information technology infrastructure. Revenue should continue to grow at 25 to 30 per cent due to secular growth in the education segment, Repro’s enhanced production capacity and ability to take on larger orders, especially in Africa. Profit margins can expand due to economies of scale and larger revenue share from Africa. There is potential for a price/earning re-rating if the company can sustain its return on equity above 20 per cent. Initiate coverage with Buy.
K M Global Investment Research
Reco price/date: Rs 86/June 5
Current/target price: Rs 87/Rs 92
Cosmo Films Ltd delivered a de-growth of 4.9 per cent in the top line on a year-on-year basis and 20.1 per cent on the Ebitda front. The FY12 top line growth remained flat due to lower volumes. The Ebitda margin came in lower at 8.3 per cent. The net profit came in a tad higher at Rs 31.crore. Going forward, the margins of the company are likely to remain subdued on account of higher raw material costs and increased competition. However, the volumes growth is seen at 14 per cent in FY13, which is likely to lead to a top line growth of 3.8 per cent along with an Ebitda growth of 4.1 per cent. Reduce from Overweight to Neutral.