>ELDER PHARMACEUTICALS LIMITED: Well-known brands in the domestic market, Shelcal, Chymoral, Eldervit, Formic-O & Somazina

We expect EPL to report 24%CAGR in net sales and 28% CAGR in net profit over the next three years. With its presence in high growth niche therapeutic segments and excellent brand recall, the company is likely to derive higher than market growth. EPL has plans to add over 1,000 MRs in the domestic market in the next two years to cover additional geographies and doctors. It has plans to enter into CVS and anti-diabetic segments. EPL has established a manufacturing facility in Bulgaria to cater to European, CIS and Russian markets. We initiate
coverage on the company with a Buy rating and Target price of Rs462 with 34% upside from the current level.


■ Strong brands: EPL markets some of the well-known brands in the domestic market, Shelcal, Chymoral, Eldervit, Formic-O, Somazina etc. These brands are market leaders in their respective segments and are likely to drive future growth.


■ Margins to improve from FY13 onwards: The company’s EBIDTA margin is expected to decline in FY12 due to the integration of low margin business of its subsidiaries Neutra Health, UK and Biomeda, Bulgaria. We expect the margin to improve from FY13 onwards following the breakeven of these subsidiaries.


■ New products to drive growth: We expect EPL to benefit from new product introductions in the domestic market. The company has a pipeline of 36 new products across various therapeutic segments. These are likely to drive future growth.


■ In-licensing deals: EPL has over 25 in-licensing deals and derives 6% of its revenues from in-licensing product sales. The company’s patent non-infringing strategy makes it the most preferred partner with MNC pharma companies.


■ Strong financials: We expect EPL to report 24% CAGR in revenues, 23% CAGR in EBIDTA and 28% CAGR in net profit over next three years.


■ Valuation: At the CMP of Rs346, the stock trades at 8.4x FY12E EPS of Rs41.1and 6.7x FY13E EPS of Rs51.3. We initiate coverage on the company with a Buy rating for the scrip with a target price of Rs462 based on 9x FY13 EPS with an upside of 34% over CMP.


To read the full report: EPL
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