Dishman Pharma - Midcap Stock for Long Term
Advised By: Mehraboon Iraniof Centrum Broking
Source: http://www.moneycontrol.com
Most pharmaceutical stocks have gone up a little bit too sharply with what happened in the US. But the fact is some of them have gone up sharply for reasons, which are right and some of them have gone up sharply for no reason. That is one stock in the midcap space, which we like, is Dishman Pharma and the reason for this is simple. The stock has done nothing over the last many months. We are very positive on this company over the slightly longer-term because we see a sharp improvement in the turnover and the bottomline as far as 2011-12 goes.
Year 2009-10 was difficult for this company. The company is mainly in the contract research and manufacturing services (CRAMS) space. We know the CRAMS space is not a very comfortable space to be in as far as 2009-10 goes. Plus there was disruption of supply of active pharmaceutical ingredients (API) to Solvay because of restructuring at Solvay. But the management has given a very decent number for 2010-11 as far as Solvay goes.
Second, the company has incurred a lot of capex in the recent past. One of them was in Bavla for setting up an oncology unit, which should start giving the company very decent revenue starting from 2011-12 or rather from second half of 2010-11. Also unit setup in China should start production in 2010-11—it should start giving lovely bottomline and topline to the company in 2011-12.
This year is not a good year. We are looking at earnings around Rs 14-14.5. We should go up to around 18.75 in 2010-11 and to around Rs 26 in 2011-12. Over the next one-year, we are quite confident that the stock should give you at least 30-40% returns.
It’s a stock absolutely for investors who want an exposure in the pharma space are little bit worried saying that, “Most pharma stocks have gone up. What should I buy?” I think Dishman Pharma is the stock for them.
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