Monday, April 12, 2010


CMP Rs 224 EPS Rs 17.91 (FY09) Book Value Rs 87 D/E Ratio 0.97
Dishman was established in 1983 and started with production of a range of phase transfer catalysts and quats at Naroda facility. But after that it has come a long way and now it is a leading CRAMS player. Dishman is the global outsourcing partner for the pharmaceutical industry offering a portfolio of development, scale-up and manufacturing services. The products and services offered span customers’ needs from chemical development to commercial manufacture and supply of active pharmaceutical ingredients. The company has its facilities in India, China, Switzerland, Netherlands and UK. The company’s business is divided into four major categories and two sub categories Viz. Dishman Specialty Chemicals, Dishman Custom Services, Dishman Vitamins and Chemicals, Dishman Disinfectants.

  • Promoters hold 60% stake in the company (Dec-09). The Company is setting up a plant for hydro and solvent tests. As per the management confirmation, its Shanghai operations will commence by August 2010. 
  • The Company has entered into a strategic alliance with a California-based biotech company Codexis.The five year strategic partnership will let company use Codexis' proprietary technology for the manufacturing of building blocks, intermediates and API's for innovator pharmaceuticals companies. This makes Dishman the only company to have a high grade technology platform in the Indian CRAMS segment.
  • The Company has already started the construction of its SEZ in Ahmadabad in March FY 09. The SEZ covers area of 110 hectares, out of which 72% is earmarked for the processing zone, while the remaining 28% area will be utilized as nonprocessing zone. This will help company in some diversification.
  • The Company has received approval from USFDA for its Naroda (Ahmedabad) plant and from TGA, Department of Health and Ageing of government of Australia for its Balva plant for manufacturing of APIs.
  • The company has posted CAGR of more than 20% in both Revenue and Profits for the last 5 years. The Indian Govt expects 18% CAGR for the Pharma sector until 2015 which means
  • doubling of revenue up to USD 40bn over the next five years. Growth will be driven by all segments: domestic formulations, generics exports, and outsourcing (CRAMS). Recent healthcare bill passed in the US aims to bring health care facilities to 10% of the total US population which is currently uninsured. Also, the US administration has projected a reduction in fiscal deficit of USD 143bn by cutting cost of public healthcare in the next 10 yrs. 
  • Dishman has a very long experience in this business and has ability to manage the clients. With strong R&D backing, the processes are cost effective. Indian companies are awakening to exports and Growth of generics market in Europe, Japan and US would be beneficial. Dishman has enhanced its presence in international market by subsidiaries and so has more scope to expand. 

Technical View:
DISHMAN has underperformed the benchmark indices in last year but it is consolidating its gains and now in a channel.  The stock is trading above all important moving averages and volume oscillators show accumulation in the scrip. Buy for targets of Rs 255-260 in short-term and traders can keep stops at Rs 209 on closing basis. For investors the stock is worth buying slowly for targets above Rs 300 in 1-2 years.


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