Upgrading Dishman Pharma

Dishman Pharma reported an inline Q2 ended Sept-30th. Sales up 59% and PAT up 67%, although YoY figures are not entirely comparable given that Carbogen Amcis (CA) was present only for 1 month in 2Q07.

Management expects significantly large contract wins from Solvay over the next few quarters. Dishman has recently increased capacity for Solvay; Vitamins business buyout from Solvay to be effective by October end; 8 projects from CA have been transferred to India.

Expect the strong INR trend and lumpy nature of the CRAMS business to lead to volatility in quarterly earnings in the near term. However, Dishman is in the process of re-negotiating prices with its customers. We expect Dishman to report a fully diluted EPS of Rs 14.40 and Rs 19.75 for FY08 and 09 respectively. The stock has historically traded at valuations of 15x. Buy Dishman with a target price of Rs 360.

Read about Citi’s upgrade report on Jubliant Oragnosys.