Slower domestic growth impacts Unichems Q3 performance

The company posted 7.5% y-o-y growth in the domestic market

The impact of slowdown in domestic pharma demand was visible in Unichem’s December’12 quarter performance. The months of November and December’12 have seen slowing of demand in the domestic arena. Not only the acute segment has seen the impact but even the chronic segment has grown below expectations.

Thus it was not surprising to see Unichem posting just 7.5% y-o-y growth in the domestic market. With Exports also remaining soft overall revenues at Rs 232.58 crore could improve just 4.5% over December’11 quarter.

The rising employee costs offset the benefit of lower raw material to sales costs. However with other expenses also declining, EBIDTA margins at 17.3% during the quarter were higher than 16.8% in December’11 quarter.

Other Incomes also got a boost with Forex gains of Rs 2.93 crore that led profits at Rs 30.35 crore grow  24% over the year ago quarter, though on sequential basis was lower than Rs 35.07 crore seen in September’12 quarter.

As analysts see the domestic pharma growth rebounding in the March’13 quarter, the performance of Unichem in the next quarter will thereby be watched for.

Analysts at Karvy stock Broking still maintain a buy on the stock. In the first cut post results they observe, “Currently, we have a buy rating on the stock with a price target of Rs 210 based on 12.6x FY 2014E (EPS Rs 16.7)”.

This means an upside of 10.8% from the current stock prices of Rs 189.60.