Vivimed Labs Ltd (Vivimed) is a speciality Chemical Company with prime focus on the Home and Personal Care (H&PC) segment (covering oral care, sun care, skin care, hair care, preservatives, anti-aging molecule etc.). It holds an unique position in the global H&PC industry with supply-chain relationship with global leaders including - Unilever, L'Oreal, Procter & Gamble, Johnson & Johnson etc.

Having been incorporated in 1989 and manufacturing Specialty Chemicals and cosmetic ingredients like Triclosan, Avis etc. Vivimed is the 2nd largest manufacturer of Triclosan (an antibacterial used for oral care) globally and one of the top three companies for UV-A filter (sunscreens). Apart from its range of active ingredients for H&PC segments, Vivimed offers its expertise in synthetic organic chemistry to offer products that are broad spectrum anti-bacterial and antifungal biocides, aimed at catering to the needs of high growth sectors such as Plastic additives, Industrial preservatives, Construction and Paint Industries. Also through acquisitions of Creative Health Care and merger of associated company VVS Pharmaceuticals & Pharmaceuticals Pvt Ltd, Vivimed entered into the speciality pharma business.

Vivimed is uniquely positioned in the domestic home and personal care industry with no strictly comparable peer. At the current market price of Rs 116 the stock trades at 5x its FY09E estimated earnings and 2x its FY09E EV/ EBITDA. Also the stock is available at a steep discount to FY08E revenues which is clearly reflected by a market cap/Revenue multiple of just 0.6x when topline growth both on a absolute and relative basis during the next 2 years look robust which gives us the confidence of revenue visibility for Vivimed ahead.

With the robust earning visibility and concrete association with the global leaders, we believe Vivimed would see sharp re-rating shortly. Hence, we initiate coverage on Vivimed with target price of Rs 185. At target price the stock would be valued at 8x it FY09E EPS and 3x its FY09E EV/EBITDA.