Buy Omkar Speciality; target of Rs 140: Mehta Equities Moneycontrol (10/06/2013)
Mehta Equities is bullish on Omkar Speciality chemicals (OSCL) and has recommended buy rating on the stock with a target price of Rs 140 in its June, 2013 research report.
Result update Q4FY13: Omkar speciality Q4 results were inline with our expectation; Topline grew up by 28 percent to Rs 52.4 Cr from Rs 41 Cr on YoY basis mainly on the back improvement seen in Export segment, largely consisting of high value-added products, grew by 82 percent y-o-y in Q4FY13 EBITDA margin remained flat on YoY at 21.4 percent from 21.2 percent as the benefit of better product mix in high value-added products. PAT was under pressure mainly on the back of higher depreciation effects and higher tax provision during the quarter; for the full year, the tax rate was 31 percent. Going forward we expect contribution from high value-added Products in FY14 on the back of expected ramp-up in manufacturing of new products in the Urdhwa and Lasa Labs plants.
Increase in export revenue helps Omkar to maintain healthy growth: To keep the pace on, Omkar has lined up plans to launch 2-3 more export oriented products every quarter from the newly commissioned plants which will drive the revenue from export segment in FY14E.
New capacity to add value going forward: OSCL has commissioned Urdhwa plant in mid-December 2012 and is currently running at an utilisation rate of around 40 percent. We expect the utilisation level to improve to 50 percent -60 percent and reach 75 percent in Mid FY2014E which will help to boost overall volume and profitability going ahead.
For the Audited full year, net profit rose by 29 percent to Rs 20.56 cr in the year ended March 2013 as against Rs 16 cr year ended March 2012. Sales rose 27 percent to Rs 211 cr in the year ended March 2013 as against Rs 166 cr during the previous year ended March 2012.
Going forward we believe that the performance will be backed by capacity growth which is inline with our expectations. We see very less small pharma intermediaries having fundamental growth potential to grow more than the industrial growth and Omkar is one among them. On valuation parse at the current market price of Rs 115, the stock is trading at PE of 8.7x times to its FY14E earnings of Rs 13.2 on a conservative basis. Hence we believe performance to translate into healthy growth in forthcoming earnings. We continue to remain positive and expect healthy gains from the current levels with a target of Rs 140 on short to medium term horizon," says Mehta Equities research report.