ORCHIDCHEM

Buy Orchid Chemicals and Pharma; target Rs 270

Orchid Chemicals and Pharmaceuticals has been sanctioned USD 100 million (Rs 5.32 billion) by way of external commercial borrowings (ECBs) by a consortium of Indian banks to redeem its outstanding foreign currency convertible bonds (FCCBs) of USD 117 million (Rs 6.22 billion) due in February 2012.

According to the company, it will use the ECB and internal accruals to redeem the outstanding FCCBs. The total redemption value is USD 167 million (Rs 8.88 billion). We believe that this move of the company is positive and will remove concerns over the redemption of FCCBs.

Orchid chemicals would also benefit from the depreciation of rupee as over 85% of the company`s sales come from exports and are billed in USD. We maintain our `Buy` rating on the stock with a target price of Rs 270.

Buy Orchid Chemicals; target Rs 270

For 2QFY2012, Orchid Chemicals reported sales of Rs 4,657 million, registering 15.6% yoy growth. On the other hand, the company`s operating profit came in at Rs 1,044 million. OPM stood at 22.4% in 2QFY2012 vs. 17.6% in 2QFY2011.

PBT (before exceptional/extraordinary items) for 2QFY2012 came in at Rs 274 million vs. Rs 133 million in 2QFY2011. PAT for the quarter stood at Rs 207 million compared to Rs 173 million in 2QFY2011.

At the CMP, the stock trades at 6.4x FY2012E and 4.8x FY2013E earnings. We maintain our Buy rating on the stock with a target price of Rs 270.

Buy Orchid Chemicals on dips

Stocks which show relative strength on bad days should be bought. So you should buy Orchid on all declines with a stoploss of about Rs 296, it could move upto Rs 344.

Buy Orchid Chemical; target of Rs 360

Orchid Chemical is standing right at important support formed through the convergence of rising channel inside band, 21 Day Exponential Moving Average and Fibonacci Confluence Zone. Holding such important support it has formed a five legged (a-b-c-d-e) corrective triangle formation. Triangle by definition are continuation pattern which suggest post breach of ‘b-d’ line the next leg will continue it previous impulse which happens to be positive in this case. On daily chart RSI has formed a MDRP+ formation with price at important support zone and its derivative too has formed a positive divergence with RSI, both exhibiting positive characteristic. Also the Daily MACD (DEMA smoothed) at it respective zero line has given a positive crossover, which again augur well for the bulls. We suggest buying Orchid above Rs 314 with a stop-loss of Rs 293 for a target of Rs 360.

Sell Orchid Chemicals

Orchid Chemicals has also run up quite sharply from about Rs 200 levels to about Rs 340. This could again come under pressure. We sell this with a target of Rs 273.

Angel Broking neutral on Orchid Chemicals and Pharma

Orchid Chemicals and Pharmaceuticals (Orchid) reported 1QFY2011 results, which were above our expectations driven by other operating income and higher off-take under the Hospira contract. For FY2011, the company has guided for top-line growth of 23% to Rs 1600 crore with EBITDA margins (including other operating income) of 22%. However, concerns on the balance sheet front persist (high receivable days and low fixed-asset turnover ratio). We maintain neutral on the stock

Sell Orchid Chemicals, target of Rs 142

On the bourses, over the past one year, the Orchid Chemicals stock has outperformed the BSE HC Index by 22% mainly driven by approval of its key product, Tazo Pip, with six months exclusivity. On the valuation front, at current levels, the stock is trading at 16.7x FY2011E and 13.7x FY2012E Earnings; on EV/Sales basis, the stock is trading at 1.7x FY2011E and 1.6x FY2012E EV/Sales. We recommend a Sell on the stock, with a 15-month Target Price of Rs 142 (we have valued the company at 10x FY2012E Earnings attaching a discount of 20% to our Mid-Cap multiple) given lack of future growth drivers and suppressed Return Ratios.

Accumulate Orchid Chemicals, target of Rs 175

We believe that approval of Tazo Pip in the US with six months exclusivity is a big positive for Orchid Chemical. The product is expected to contribute US $84mn to its Top-line during the exclusivity period and would be a limited competition opportunity for the company even in FY2011E. Following the approval, we believe the focus will now shift towards de-leveraging its Balance Sheet as Orchid's Debt levels have been on the higher side with its Debt/Equity ratio at 4x in FY2009. Orchid also has a significantly high working capital cycle. On the bourses, the stock, in the last few sessions,has rallied an unprecedented 28% factoring in the positives from the approval. We recommend an 'Accumulate' on the stock, with a revised target price of Rs 175 (Rs 110) and believe further re-rating of the stock hereon would be driven by Balance Sheet de-leveraging.

Hold Orchid Chemicals, target of Rs 176

With the better earning visibility, improvement in Balance Sheet health and follow on product opportunities (like penems starting from late FY10) we expect Orchid would see re-rating in it valuations. Thus, in line with our earning upgrade, we have raised our target price to Rs 176 (i.e 10x FY11E). But looking at the overwhelming 25% rise in stock price to Rs 158 on 16th Sep 2009 (subsequent to the Tazo Pip approval in US), we recommend a 'HOLD' rating with revised target price of Rs 176.

Buy Orchid Chemicals, target Rs 184

The launch of Tazo-Pip in the USA and the incremental revenues from the Penem segment (expected in Q4FY2010) would act as major triggers for Orchid Chemicals and Pharmaceuticals in the near term, whereas the reduction in debt levels and interest cost would drive the stock in medium to long term. At the current market price of Rs 164, Orchid is discounting its FY2011E earnings by 7.2x. We maintain our Buy recommendation on the stock with a revised price target of Rs 184.

Hold Orchid Chemicals

Considering the attractive valuations, looking at the strong earnings opportunities (including launch of Tazo Pip in US) ahead with a robust pipeline and improvement in its core operations, we maintain our positive stance on the company. Hence, despite the target price being hit, we maintain a hold recommendation on Orchid.

Buy Orchid Chemicals, target of Rs 122

Orchid Chemicals & Pharmaceuticals Ltd (Orchid) reported 7% growth in its consolidated revenues to Rs 3299.6 million during Q1FY10, which is almost in line with our expectations. Incremental revenue from Tazobactun Pipperacillin (Tazo Pip) worth about USD 7 million in Europe and sequential recovery in the slowdown impacted US operation could support the revenue growth.onsidering the strong pipeline of earning opportunities ahead and improvement in its core operations and reduction in amortizable translation loss in books, we upgrade our recommendation from reduce to 'Buy' with revised target price of Rs 122.

Buy Orchid Chemicals, target of Rs 110

For 1QFY2010, Orchids net sales increased 8% to Rs 305.8 crore (Rs 282.6 crore) driven by launch of the high-Margin Tazo-Pip in Europe. At current levels, the stock is trading at 6.1x FY2011E Adjusted Earnings and 1.3x FY2011E EV/Sales which we believe adequately factors in the concerns on the debt front and delays in getting approval for its high-Margin products. We maintain a 'Buy' on the stock, with a target price of Rs 110.

Buy Orchid Chemicals, target of Rs 110

Orchid has been an underperformer on the bourses on account of delays in receiving approvals for its high-Margin products, which resulted in higher Debt burden. However, now having received approval for Tazo Pip in the EU and likely approval for the product in the US in 2QFY2010, we believe the product pay-off has begun for the company. Nonetheless, we have pruned our FY2011E Earnings estimates by 13.3% post increase in the MAT rate in the recent Union Budget from 10% to 15% as the company does not claim the MAT credit.n the valuation front, the stock is trading at 5.3x FY2011E Adjusted Earnings and 1.3x FY2011E EV/Sales, which we believe discounts the high debt on the company's Balance Sheet and delays in receiving approvals for its key products. Hence, we recommend a Buy on the stock at 7x FY2011E Adjusted Earnings with a revised Target Price of Rs 110 (Rs 136). At our Target Price the implied EV/EBITDA stands at 5.7x and EV/Sales at 1.4x FY2011E, which is much below its historical average of last 4 years of 12.1x and 2.6x, respectively.

Buy Orchid Chemicals, target of Rs 163

The approval and launch of Tazo-Pip in the USA and the resumption of supplies to Europe would act as major triggers for the stock in the near term, whereas the reduction in the debt levels and interest costs would drive the stock in the medium to long term. At the current market price of Rs 94, Orchid is discounting its FY2011E earnings by 5.8x. We maintain our Buy recommendation on the stock with a price target of Rs 163.

Buy Orchid Chemicals, target of Rs 176

Orchid Chemicals & Pharmaceuticals (Orchid) is an integrated pharmaceutical company with core competencies in the cephalosporin injectable space and that too in regulated markets of US. Having an established strong base in US cephalosporin segment, the company is now spreading its wings to other regulated markets like Europe and Canada. Further the company is progressing well in the non-penicilin, noncephalosporin (NPNC) and drug discovery front. Orchid is currently trading at an attractive valuation of 5x it FY11 EPS its FY11 EV/ EBITDA. Further looking at the robust earning opportunities in the pipeline and debt reduction comitment, we recommend a 'BUY' rating on Orchid with a target price of Rs 176 (8x FY11E).

Buy Orchid Chemicals, target of Rs 163

At the current market price of Rs 136, Orchid is discounting its FY2009E earnings by 10.7x and its FY2010E earnings by 8.3x. Though the valuations are not inexpensive any more (due to a 38% appreciation in the price of the stock in the past one month) and though the financial performance would continue to remain weak in the near term, we believe that the possible approval of Tazo-Pip in the next few months could result in marked re-rating of the stock. Hence looking at the future event triggers, we upgrade our target multiple from 8x to 10x and maintain our Buy recommendation on to the stock with a potential price target of Rs 163.

Buy Orchid Chemical, target of Rs 128

Orchid Chemicals and Pharmaceuticals announced that it has bought back bonds worth USD 25.7 million out of the total outstanding FCCB of USD 194.7million as on date, and was in the process of extinguishing the same. The funding has been done through ECB. Post this transaction, the company would have FCCBs worth around USD 169 million of which USD 19.7 million is payable in FY2011 and USD 149.3 million in FY2012. The company intends to purchase additional bonds from the market and extinguish them from time to time. We believe the transaction per se will not materially alter the companys current Debt/Equity ratio of 3x. We maintain a Buy on the stock, with a target price of Rs 128 as the stock ontinues to trade at 11.8x FY2009E and 3.9x FY2010E adjusted Earnings. We believe launch of Piperacilin-Tazobactum in Europe would be a key positive trigger for the stock in the near term.

Buy Orchid Chemicals, target of Rs 128

Orchid Chemicals & Pharmaceuticals (Orchid) will raise overseas debt to retire the USD 175 million (Rs 858 crore) foreign currency convertible bonds (FCCBs). A resolution passed by the companys Board recently allowed it to raise up to Rs 1,500 crore, for which shareholder approval is expected to be sought soon. The companys FCCBs are currently being traded at a significant discount and are set to mature in February 2012 at a strike price of Rs348 for conversion to Equity. The current yield-to-maturity is 7.25%. This move takes advantage of the recent liberalised norms that permit companies to use proceeds from overseas debt to retire FCCBs. The company did not confirm about the price at which the bonds would be bought back. We maintain a Buy on the stock, with a target price of Rs 128.

Buy Orchid Chemicals, target of Rs 117

The Q3FY2009 results of Orchid Chemicals and Pharmaceuticals (Orchid) have been below our expectations, with a decline in revenues coupled with high foreign exchange (forex) translation losses and high interest cost straining profitability. In view of the higher risk associated with the companys business (owing to its high dependence on a few products, high debt levels) and the shrinking valuation multiples across the globe, we lower our target multiple for Orchid from 12x to 8x. We maintain our Buy recommendation on the stock with a revised price target of Rs 117.

Buy Orchid Chemicals, target price of Rs 86

Orchid Chemicals & Pharmaceuticals Ltd (Orchid) reported flat revenues at Rs 3215 million in its consolidated revenues, as there were no major product launch during the quarter and the US operation witnessed a overall slowdown. We foresee a sound long term prospects of the company and put a BUY rating with a revised target price of Rs 86 (from earlier Rs 92). At this TP, the stock would available at 5x FY10EPS and 6x FY10 EV/EBITDA.

Buy Orchid Chemicals, target of Rs 128

The Companys performance during the quarter was much below our expectations. For 3QFY2009, the company posted Net Sales of Rs 295.3 crore, registering a yoy de-growth of 8.0%. We believe launch of Piperacilin-Tazobactum in Europe would be a key positive trigger for the stock in the near term. At Rs 72, stock is trading at 12.0x FY2009E and 4.0x FY2010E Adjusted Earnings. We maintain a Buy on the stock, with a revised target price of Rs 128 (Rs 210).