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Vimta Labs Ltd. recently announced its performance for the quarter ended September 30, 2023. Following are the key highlights.

Highlights from the Quarter (Q2 FY24)

Consolidated sales for the quarter were at Rs.73.4 cr recording a de-growth of about 8.1% yoy. Slower approvals from DCGI (Drug Controller General of India) for Bioavailability & Bioequivalence (BA-BE) studies impacted the pharma segment in the current quarter, while preclinical is seeing strong traction. The company is confident that these headwinds are temporary in nature and it expects qoq growth in Q3FY24. Electronic testing is witnessing strong traction with the current capacity utilization at ~80%. Testing of defence equipment is expected to pick up as there is a mandate to source components from the domestic market to upto 50%, which should drive electronic testing going forward. Food inflation and lower consumer demand impacted the import of food items. However with the Govt of India reducing import duty on the food items, it is expected to boost import in the coming quarters.

Following is the guidance given by the company:

1) Revenue in H2FY24 to be higher than H1FY24, with growth in FY24.

2) Sales to reach Rs.500 cr by FY26, aided by capacity expansion in FY24.

3) Q3FY24 topline to be better than Q2FY24, with EBITDA margins closer to 30%, a significant improvement over the current quarter.

OUTLOOK AND VALUATION

We expect the FY26E EPS to be Rs. 35.5 and the PAT margin to be 16.6%. We have assigned a P/E multiple of 21X and arrive at a Target Price of Rs. 727, showcasing an upside potential of 67% from current levels with an investment horizon of 18-24 months, with a BUY rating on the stock.

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