2 August 2012
1QFY13 Results Update | Sector: Healthcare
Dishman Pharma
BSE SENSEX
S&P CNX
17,224
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
5,228
DISH IN
81.3
87/33
13/46/-5
6.2
0.1
CMP: INR76
TP: INR103
Neutral
Dishman's 1QFY13 performance was above estimates. Key highlights:
Dishman's 1QFY13 performance was above our estimates. It reported 32.9% YoY growth in revenues to INR3.15b
(v/s est INR3.04b). EBITDA grew 91.3% YoY to INR836m (v/s est INR643m) while Adj PAT increased 156% YoY to
INR387m (v/s est of INR143m).
EBITDA grew 91.3% YoY to INR836m (v/s est INR643m) on a low base led by healthy topline growth and
favorable currency. EBITDA margin improved 810bp YoY to 26.5% (v/s est 21.2%).
The company reported 156% YoY growth in Adjusted PAT to INR387m (v/s est of INR143m) led by strong
operational performance and lower than estimated tax expense during the quarter.
Outlook and view:
The macro environment for CRAMS business remains favorable given India's inherent cost
advantages and chemistry skills. We believe Dishman's India operations will benefit from increased outsourcing
from India, given its strengthening MNC relations and expansion of some of the existing customer relationships.
However, the company needs to ramp-up its contracts with innovators to take advantage of the macro opportunity.
We expect revenue CAGR of 18.6%, EBITDA CAGR of 27% and earnings CAGR of 56.9% over FY12-14. Earnings
growth is led by robust operational performance and lower tax expense. Low asset utilization, high debt and
delayed ramp-up of CRAMS contracts remain our main concern. We have upgraded our earnings estimates for
FY13 and FY14 by 15.6% and 4.1% respectively. Based on our revised estimates, the stock currently trades at 5x
FY13E and 4.4x FY14E earnings. RoCE will continue to be subdued till new facilities and CRAMS contracts ramp up.
We maintain
Neutral
rating with price target of INR103 (6x FY14E EPS).
Nimish Desai
(NimishDesai@MotilalOswal.com); +91 22 3982 5406
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Dishman Pharma
Performance led by MM segment, CarbogenAMCIS and favorable currency
Dishman's 1QFY13 performance was above our estimates. It reported 32.9% YoY growth
in revenues to INR3.15b (v/s est INR3.04b). EBITDA grew 91.3% YoY to INR836m (v/s
est INR643m) while Adj PAT increased 156% YoY to INR387m (v/s est of INR143m).
Topline growth was led by MM segment, up 51% YoY to INR1.18b led by both Vit D (up
67% YoY to INR546m) and QUATs (up 39% YoY to INR637m). Company has been
witnessing robust demand for Vit D due to shortages globally. During the quarter, the
company started production of few more Vit D analogues. The growth was also led by
favorable currency.
CRAMS revenue grew 24.1% YoY to INR1.97b (62% contribution to revenues) led by
78% YoY growth in revenues from CarbogenAMCIS on the back of increasing customer
orders and favorable currency. Revenue from Indian facilities declined 24% YoY to
INR640m due to absence of supplies of Eprosartan to Abbott during the quarter.
Sales mix (INR m)
CRAMS
Dishman
Carbogen AMCIS
MM
Vitamin-D
QUATs
Total
1QFY13
1,970
640
1,330
1,183
637
546
3,153
1QFY12
1,588
840
748
785
458
327
2,372
% YoY
24.1
-23.7
77.8
50.8
39.2
67.0
32.9
4QFY12
% QoQ
2,198
-10.4
1,044
-38.7
1,154
15.3
1,304
-9.3
533
19.6
771
-29.3
3,502
-10.0
Source: Company/MOSL
EBITDA increased by 91% YoY to INR836m and was above our estimates
EBITDA grew 91.3% YoY to INR836m (v/s est INR643m) on a low base led by healthy
topline growth and favorable currency. EBITDA margin improved 810bp YoY to 26.5%
(v/s est 21.2%).The company reported 156% YoY growth in Adjusted PAT to INR387m
(v/s est of INR143m) led by strong operational performance and lower than estimated
tax expense during the quarter.
EBITDA & margin trend
Source: Company/MOSL
2 August 2012
2

Dishman Pharma
Guides for INR12-13b for FY13
Dishman has guided for INR12-13b topline for FY13 primarily led by execution of new
contracts, improved performance by CarbogenAMCIS, higher demand for Vit D and
commissioning of new facilities.
While it has not given any EBITDA margin guidance, it has indicated that it expects
FY13 to be a good year operationally. We estimate 420bp expansion in EBITDA margin
for FY13 to 24%. CarbogenAMCIS (CA) is expected to record revenues of CHF100m.
Tax rate for FY13E will be ~25%.
New facilities & projects to come up for utilization from FY13
Dishman has recently commissioned three new facilities including the High Potency
unit (HIPO) which has commenced manufacturing of Gemcitabine.
Also, Dishman has started supplying to one of its European innovator partner for a
new CVS drug approved by USFDA recently. Although the revenue ramp-up from this
contract is slow, management has indicated that this could potentially be a promising
product in the long term.
Abbott (via Solvay) has made Dishman the single source for Eprosartan from CY12
which will double the quantity supplied by Dishman from CY12. The total order size is
USD100m for 3 years contract.
Incremental revenue contribution is also expected from the commissioning of the
new disinfectant facility.
CarbogenAMCIS has turned around; management guides for CHF100m sales
in FY13
After passing through a rough patch last year, Carbogen AMCIS (CA, Dishman's Swiss
subsidiary) had started showing a recovery towards the end of FY12 led by improving
order book, cost cutting measures taken by the management and favorable currency.
For 1QFY13, CA reported robust performance with 78% YoY growth in revenue to
INR1.33b and INR212.6m of EBITDA (EBITDA margins of 16%). Management has guided
for CHF100m in sales for CA for FY13.
Significant under-utilized facilities - pressurizing return ratios
Over FY09-12, Dishman's gross block increased at 18% CAGR to INR13.24b while
revenues remained flat at ~INR10.5b, thus pressurizing return ratios. RoCE is down
from 15.2% in FY09 to 9% for FY12 while debt has increased at 11% CAGR to support
the large capex. We believe it is imperative for Dishman to improve its asset utilization
to come back to normalcy. Management has indicated that while it has signed many
contracts with various innovators, they are yet to ramp up into meaningful revenues.
2 August 2012
3

Dishman Pharma
Upgrading EPS by 15.6% for FY13 and 4% for FY14
Based on the 1Q performance and FY13 management guidance, we have raised our
FY13 and FY14 EBITDA estimates by 14.2% and 7.6% respectively to take into account
favorable impact of INR depreciation and improving performance of CarbogenAMCIS.
However, the upgrade in FY14 estimates is much lower than that of FY13 estimates is
because of expected appreciation of INR v/s USD going forward.
Given the higher tax rate guidance and higher than estimated interest cost, we have
upgraded earnings estimates for FY13 and FY14 by 15.6% and 4.1% respectively. Based
on our revised estimates, we forecast FY13E EPS at INR15.3 (up 118.5% YoY on a low
base) and FY14E EPS at INR17.2 (up 12.6% YoY).
Outlook and view
The macro environment for CRAMS business remains favorable given India's inherent
cost advantages and chemistry skills. We believe Dishman's India operations will
benefit from increased outsourcing from India, given its strengthening MNC relations
and expansion of some of the existing customer relationships. However, the company
needs to ramp-up its contracts with innovators to take advantage of the macro
opportunity.
We expect revenue CAGR of 18.6%, EBITDA CAGR of 27% and earnings CAGR of 56.9%
over FY12-14. Earnings growth is led by robust operational performance and lower tax
expense. Low asset utilization, high debt and delayed ramp-up of CRAMS contracts
remain our main concern.
Based on our revised estimates, the stock currently trades at 5x FY13E and 4.4x FY14E
earnings. RoCE will continue to be subdued till new facilities and CRAMS contracts
ramp up. We maintain Neutral rating with price target of INR103 (6x FY14E EPS).
2 August 2012
4

Dishman Pharma
Dishman Pharma: an investment profile
Company description
Dishman Pharma is one of the leading players in the
CRAMS segment and has developed strong relationships
with innovator companies. It has established presence
across the CRAMS value chain and is also one of the
largest manufacturers of QUATs globally.
Recent developments
Nil
Valuation and view
We expect Dishman's India operations to be a key
beneficiary of the increased pharmaceutical
outsourcing from India given its strong relationships
with global innovator pharmaceutical companies.
Valuations at 5x FY13E and 4.4x FY14E earnings.
We maintain
Neutral
rating with TP of INR103 (6x
FY14E EPS).
Key investment arguments
We expect Dishman to benefit from the expected
increase in pharmaceutical outsourcing from India
over the next few years.
Dishman's focus on establishing relationships with
new customers and reducing its dependence on
Solvay has begun bearing fruits. It has signed supply
contracts with AstraZeneca and is in advanced
discussions with large companies like GSK, Novartis,
and J&J for outsourcing deals.
Sector view
India is on the threshold of a significant opportunity
in the contract manufacturing space. We expect
increased outsourcing from India as it offers a unique
proposition of low costs coupled with chemistry and
regulatory skills.
High entry barriers will ensure that the top 6-7 players
will command a disproportionate share of this
opportunity.
Key investment risks
Large under-utilized capex is pressurizing return
ratios. Company needs to boost asset utilization to
improve RoCE.
Ramp-up in business from new customers is very
slow.
Comparative valuations
Dishman
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
5.0
4.4
0.6
0.5
1.1
0.9
4.4
3.9
Divi's
22.1
18.8
5.8
4.9
6.2
5.2
17.0
14.4
Jubilant
7.2
5.2
1.0
0.9
1.1
0.9
5.4
4.4
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
15.3
17.2
FY13
FY14
Consensus
Forecast
11.1
14.2
Variation
(%)
38.3
20.8
Target Price and Recommendation
Current
Price (INR)
76
Target
Price (INR)
103
Upside
(%)
35.9
Reco.
Neutral
Stock performance (1 year)
Shareholding pattern (%)
Jun-12
Promoter
Domestic Inst
Foreign
Others
2 August 2012
61.4
7.1
4.1
27.5
Mar-12
61.4
6.4
4.1
28.2
Jun-11
61.2
7.9
8.3
22.6
5

Dishman Pharma
Financials and Valuation
2 August 2012
6

Dishman Pharma
N O T E S
2 August 2012
7

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Dishman Pharma
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