Sharekhan has come out with research report on ORCHID CHEMICALS with target 375/- with discount its FY2009E fully diluted earnings by 16x.....
Valuation & view:
With FY2007 over, Orchid's lean phase seems to be getting over. Orchid has been investing steadily in building its product pipeline to expand its presence in the regulated markets of the USA and Europe. Going forward, especially from FY2008 onwards, we believe the company will grow by leaps and bounds, with its big launches in the USA and entry into Europe. With the new FCCB issue, the company has also cleaned up its balance sheet, which was a cause for huge concern for investors in the past. The reduced debt level will generate substantial savings in interest costs, which will boost Orchid's bottom line in the future. Further, with an improved product and geographical mix, Orchid's margins will also show substantial expansion. With a strong top line growth, robust margins and a clean balance sheet, Orchid's future seems very bright. At the current market price of Rs 244, Orchid is quoting at 10.4x its estimated FY2009 earnings. In view of the bright prospects for the company, we retain our positive stance on the stock and maintain our Buy call with a revised price target of Rs 375, at which Orchid will discount its FY2009E fully diluted earnings by 16x.
