Recommendations From Misc.Commercial Services & Pharma Sectors
The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations
DELTA CORP
CMP- Rs 256.25
BSE CODE- 532848
Volume- 635301
Face Value- Rs 1
Target- Rs 282
Stoploss- Rs 229
The owner of casinos (88.7% revenue) and hotels (11.3%) in Goa is the only listed company in this segment. The company owns three casinos, viz; Deltin Royle, Deltin JAQK, Deltin Carvel and two hotels viz; Deltin Suites and Deltin Palms in Goa. The fundamentals show that the company’s TTM topline and bottomline have grown considerably by 46.7% and 138.4%, respectively. Even the conventionally lacklustre Q1 was surprisingly good as revenue rose 46% YoY driven by exuberant rise of 53% YoY in casino gaming. Casino revenue grew with revival in footfalls and spillover from other casinos shutting down and pricing. The EBITDA margin too stood flat instead of de-growing, despite huge hike in licence fee.
The online gaming section's margin contracted due to higher promotional expenses along with one-time expense on Fantasy sports, but going forward, it is expected to fetch better returns with rise in number of active users. Further, with government’s initiative, Delta’s casinos would be shifted to an entertainment zone near a new soon-to-be-built airport. We recommend a BUY.
SUN PHARMA
CMP- Rs 566.65
BSE CODE-524715
Volume- 297926
Face Value- Rs 1
Target - Rs 609
Stoploss- Rs 525
Dilip Sanghvi-promoted pharma company Sun Pharma holds highest weightage in pharma index, being the largest pharma company in India. The company is engaged in global consumer healthcare business and manufacture of active pharmaceutical ingredients. The company generates revenue from exports, namely, US-46% and emerging markets-16.2%, while domestic sales contribute 26.6%. Considering the financials, its consolidated Q1FY18 topline and bottomline posted a growth of nearly 5% and 282%, respectively. Though the company’s TTM PAT show a de-growth on a consolidated basis, its standalone PAT showed loss recovery.
The Halol plant resolution followed by the first-ever USFDA approval in the last five years from this plant assures business growth with base business moving to 120 million USD from 80 million USD per quarter starting Q2. Further, the company’s base generic business loss is likely to get counterbalanced with innovative launches in the pipeline viz; Odomzo, Siscera, Tiltra and Illya. With expected 10% and 4% CAGR in Indian pharma and global pharma market, we recommend a BUY.