Sharon Bio-Medicine Has More Potential: IndiaNivesh

At CMP of Rs 73, Sharon Bio-Medicine is trading at P/E multiple of 7.3x of FY15E & 5.2x of FY16E earnings estimates.

We believe Sharon Bio-Medicine’s strategy of focusing on formulations (higher margin products) v/s API has started showing some early results. Due to favorable product mix the savings on material costs are likely to result in continuous improvement in Gross & Operating margins which in turn will lead to PE multiple expansion for the stock.

On a conservative note, we continue to value the stock at 10x FY16E earnings to arrive at target price of Rs 140. Our earlier price target of Rs 74 has been achieved. However we believe the company has lot more potential to deliver hence we remain optimistic on stock’s performance. We maintain BUY rating.

Download Sharon Bio-Medicine Q4FY14 Result Update