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Buy Orchid Chemical, target of Rs 128: Angel Broking

Posted on: March 27th, 2009 and is filed under Brokerage Recommendations.

Angel Broking has maintained its buy rating on Orchid Chemicals and Pharmaceuticals with target price of Rs 128 in its March 27, 2009 research report. “Orchid Chemicals and Pharmaceuticals announced that it has bought back bonds worth USD 25.7 million out of the total outstanding FCCB of USD 194.7million as on date, and was in the process of extinguishing the same.

The funding has been done through ECB. Post this transaction, the company would have FCCBs worth around USD 169 million of which USD 19.7 million is payable in FY2011 and USD 149.3 million in FY2012. The company intends to purchase additional bonds from the market and extinguish them from time to time. We believe the transaction per se will not materially alter the company’s current Debt/Equity ratio of 3x.

We maintain a Buy on the stock, with a target price of Rs 128 as the stock
continues to trade at 11.8x FY2009E and 3.9x FY2010E adjusted Earnings. We believe launch of Piperacilin-Tazobactum in Europe would be a key positive trigger for the stock in the near term,” says Angel Broking’s research report.

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