PULSE TRACK
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Inflation above market estimates
STOCK UPDATE
Orchid Chemicals & Pharmaceuticals
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs390
Current market price: Rs265
Orchid enters Canada
Key points
- Orchid Chemicals & Pharmaceuticals (Orchid) has received the approval from the Canadian Therapeutic Product Directorate for two of its abbreviated new drug submission (ANDS)—Cefoxitin and Ceftriaxone.
- These approvals mark Orchid's foray into the Canadian formulation market.
- Both Cefoxitin and Ceftriaxone are niche injectable products and have been generic for a couple of years. The size of the Canadian market for Cefoxitin is $5 million and that for Ceftriaxone is $30 million.
- As per company sources, Ceftriaxone has five competitors (Roche, Mayne Pharma, Sandoz, Nova Pharma and Pharmaceutical Partners of Canada Inc) while there is no generic competition for Cefoxitin.
- As per our back-of-the-envelop calculation, the product approval would add Rs0.4 per share to the FY2008 earnings.
- At the current market price of Rs265, Orchid is trading at 10.2x its FY2008E earnings. In view of the company's strong fundamentals and an improving balance sheet we remain positive on the stock and maintain our Buy call with a price target of Rs390.
Bharat Electronics
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,715
Current market price: Rs1,650
Exceeding expectations
Bharat Electronics (BEL) has announced its provisional results for FY2007. The gross sales have grown by 12% to Rs3,960.4 crore in FY2007, lower than our estimates of Rs4,191 crore. However, the improvement in its margins and a surge in the other income component have resulted in a relatively much higher growth of 21.8% in the profit before tax (PBT) to Rs1,041.6 crore (ahead of our estimates of Rs996 crore) during FY2007. This essentially implies that the PBT has shown a robust growth of 27.8% during the fourth quarter.
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