Analysts' corner: Petronet LNG

Brics PCG Research recommends a "buy" on Petronet LNG. The company was formed by the Indian government to set up LNG terminals in the country, as a JV promoted by Gail, ONGC, IOC and Bharat Petroleum.

It is the only company that provides regasification services. It buys LNG from RasGas, Qatar, and then regasifies and sells it to off-takers. The report states that this is a low-risk model as it secures both the purchase and sale ends of the company's business.

Natural gas is one of the booming sectors in India, especially in view of the recent gas discoveries. The demand for natural gas is continuously increasing.

Gas is cheaper than the import of crude oil necessary to generate the same amount of energy. To meet the demand-supply gap of natural gas in the country, the company has initiated efforts to double the capacity of its first LNG regasification plant at Dahej from 5 MMTPA to 10 MMTPA.

It would also be setting up another LNG receiving and regasification plant at Kochi. This will further consolidate its position as leader for LNG import and regasification in the country.

Dishman Pharma

Enam Securities, in its visit note on Dishman Pharmaceuticals, states that the company expects to achieve a turnover of Rs 37.5-40 crore by FY07 with an improved EBITDA margin.

Future growth is forecast to primarily accrue from the Crams business. Dishman has contracts from Astra Zeneca, Merck, KRKA and GSK and expects one more contract from Solvay (which could be of a scale similar to its existing one for eprosartan).

A second acquisition in Europe, to follow its recent purchase of Synprotec, is also on the cards. The company expects US FDA approval for its plant to be completed by January 2006, following which eprosartan supplies to Solvay (for the US market) should commence.

It expects to increase the capacity of this plant to 200 tpa by December 2006 (from 90 tpa currently), in the second phase. The other contracts for various anti-ulcerants are collectively expected to bring in revenues of about Rs 80 crore in FY06. The company shortly expects to start supply of SLV-306, a Solvay candidate undergoing phase III trials for congestive heart failure.

Cadila Healthcare

Enam Securities in its report states that Cadila Healthcare expects its mainline domestic formulation sales to grow 10-12 per cent per annum. Sales and profit from the Altana JV are expected to be flattish at about Rs 150 crore and Rs 95 crore respectively during FY06.

However, these should rise 5-10 per cent in FY07. Its acquisition in France is expected to turn positive by FY08 (once production is largely transferred to India) and its US operations are expected to generate revenues of $ 25-30 million.

It expects EBITDA margin to improve by 70-100 bps every year, as benefits from its new plant at Baddi and cost rationalisation measures based on recommendations by McKinsey begin to accrue.

Cadila has identified 120 products that could be launched in the domestic market over the next 4-5 years, despite India's new patent regime. Its in-licensing agreements with the erstwhile owners of German Remedies - Boehringer Ingelheim and Schering - should help it to launch about 20-25 new products annually.