We remain positive on the business model and growth prospects in Panacea’s key businesses.
We believe that going forward growth will be driven by supplies of innovative combination vaccines to US agencies (UNICEF, WHO), progress on NDDS project and cyclosporine NDDS approval for Brazil and collaboration for anthrax vaccine for the US stockpiling program.
The company has posted EPS of Rs.19.3 in FY08. Going forward, we expect fully diluted EPS Rs.15.6 and Rs.26.9 in FY09 and FY10, respectively.
In FY09, the EPS is lower mainly due to Rs.500mn provision for mark-to-market translation loss on foreign currency liabilities.
The stock has corrected significantly in recent past mainly due to some adverse media news, which management has denies strongly. We believe this correction should be used as an opportunity to accumulate the stock.
At current market price Rs225, the stock is trading at 14.4x FY09 and 8.4x FY10 fully diluted earning estimates. The business outlook is expected to remain strong with potential catalysts in combination vaccines and proprietary formulation products.
We maintain BUY with 9-12 months price target of Rs474.