The Hindu Business Line : Unichem gains on strong fundamentals

The Rs 5 face valued stock today finished at Rs 198.05, up 1.75 per cent, after touching the day's high at Rs 200 with traded quantity showing a hefty increase against its two-week average.

According to Ms Sahina Mukadam, chief analyst of IDBI Capital, the company has out performed the domestic drug companies in recent years in terms of sales growth. "It has expanded its capacities, extended its presence to newer geographies and made its R&D presence felt," she added.

Mr Milan Bavishi of Anagram Stockbroking said that an aggressive expansion is likely to result in volume-driven growth in the current fiscal. At today's closing price, the stock traded at 15 times its FY 05 earnings. On an equity base of Rs 17.06 crore, it reported cash earnings of Rs 54.40 crore in 04-05.

It has subsidiaries in the US, South Africa and Brazil. Further, it has a joint venture in the UK in which Unichem holds around 60 per cent. It is understood that the company is planning to acquire the remaining stake in the joint venture.

"Over the last few years, the company has established firmer grip in the developed markets in Europe and US as also in the emerging markets," a fund manager pointed out.

The new acquisition of an API unit, which is being upgraded for approval of the USFDA and authorities in other developed markets, and the new non-antibiotic unit are going to strengthen its R&D capabilities and operations.

"It is simultaneously achieving successes in the overseas markets in terms of marketing, research and product development - both in formulations and generics. Further clarity over VAT should fuel improvement in its sales in the domestic markets too," an analyst pointed out.

If it can have an alternative to the product category of cox-II inhibiters, which are seeing product withdrawals by the drug companies, its sales growth should surpass that in the last financial year, an industry observer said.

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