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DHG - BUY - Flat 1Q results but FY14 forecast intact; new factory operational, gets 15 year tax subsidies - Update

First quarter NPAT was flattish on modest sales growth. ETC (hospital channel sales) slumped because of Circular 01 (lowest bid wins) while OTC channel sales reported single digit growth due to sales policy changes. A new non-bectalactam plant was put into operation in late April, lifting production bottleneck. By shifting production to the new plant, DHG benefits from tax subsidies granted for the next 15 years. We upgrade DHG to a BUY rating based on forecasted EPS CAGR of 19% FY14-18E.