Dishman Pharma Results Analysis

Dishman reported 3Q FY08 numbers with revenue up 18% YoY while margins declined 939bps to 20% due to losses at subsidiaries. As a result, recurring net income (excluding MTM gains on foreign currency debt) declined 12% to Rs216m. However, we continue to be positive on Dishman and believe that 3Q FY08 was a blip due to some one-off expenses.

1) Some sales were postponed to Q4 FY08. We note this is not unusual in contract manufacturing. 2) Losses at Dishman’s subsidiaries in Japan, the Netherlands and the Middle East – all of which are businesses in the nascent stage. Management expects these to be reversed in Q4. 3) Higher staff costs due to consolidation of the vitamins business and incentive payouts at Carbogen.

Expected Fully diluted EPS – Rs 14.44 [FY08] and Rs 19.59 [FY09].