Alkem Laboratories Ltd's Q1FY19 consolidated net profit declines 115.27% yoy to Rs137.30cr: In-line with Estimates

The company’s consolidated revenue in the period stood at Rs1,669.46cr, up 166846% yoy and 10.32% qoq.

Aug 13, 2018 03:08 IST India Infoline Research Team

Alkem Laboratories Ltd Q1FY19

Consolidated Results Q1FY19: (in Rs cr)

Q1FY19 YoY (%)
Revenue 1,669.46 27.2
EBITDA 214.23 127.0
EBITDA Margin (%) 12.8 564
Net Profit (adjusted) 137.30 115.2
***EBITDA margin change is bps

Alkem’s revenue in Q1FY19 grew 27.2% yoy to Rs1,669.5cr. EBITDA in Q1FY19 grew 127% yoy to Rs214.2cr vs. Rs94.4cr in Q1FY18. EBITDA margin expanded 564bps to stand at 12.8% in Q1FY19 vs. 7.5% in Q4FY18 and 7.2% in Q1FY18. PAT grew 115.2% yoy to Rs137.3cr in Q1FY19 vs. Rs63.8cr in Q1FY18.
  • India sales grew 25.7% yoy to Rs1,090.6cr in Q1FY19.
  • The company has made changes in its distribution policy due to which some portion of its India sales got deferred from Q1FY19 to Q2FY19 and adjusted for this, domestic sales and EBITDA would have been higher.
  • We believe that the EBITDA margins of the company are below expectation; however, considering that its sales got deferred to Q2FY19E, the numbers could have come in-line or better than expectations.
  • In Q1FY19, the company has continued to outperform the domestic industry growth in anti-infective, gastrointestinal, vitamins, CNS, derma, cardiac, and anti-diabetic, while saw slower growth in pain management.
  • The US sales in Q1FY19 grew 43.1% yoy to Rs423.7cr.
  • The company has filed a total of 110 ANDAs, of which, it has received approval for 51 ANDAs (including 7 tentative approvals).
  • Other international markets sales for Q1FY19 grew 13.4% yoy to Rs124.2cr.
  • Company's Baddi manufacturing facility was inspected by the USFDA between August 6-10, 2018, with no form 483. Daman facility has already received EIR from the USFDA.
Concall highlights
  • During Q1FY19, revenue of Rs191cr were deferred, adjusted for this, EBITDA could have been higher by Rs105cr, EBITDA margin could have been at 17.2% and PAT could have been higher by Rs85cr.
  • Adjusted for the deferred sales, growth in the India business is 47%, which is better than expected.
  • In Q1FY19, India revenue split was - acute 80% and chronic 15%. 
  • Company launched 38 products in India and expects to better resource utilization due to the new distribution policy.
  • Chronic business outperformed the industry growth and company remains positive on profitability of this business, which has higher gross margins than in acute business.
  • Company has said that it’s chronic business will double every four years but for the next three years acute will remain its largest business.
  • Total MR count by end of Q1FY19 was 8,000, of which acute formed 75% and chronic formed 25%.
  • India market growth likely to be 10% in FY19E - value 2-3%, volume 4% and new product 3%.
  • The Chinese API prices have gone up and company expects EBITDA margins to be impacted by 0.5% in FY19E.
  • In Q1FY19, there were no significant product launches in the US market and price erosion (qoq and yoy) was in low single digits.
  • Company has maintained guidance of 12 fillings/year in complex oral solids and high single digit product launches in FY19E
  • <20% of the US business is vertical integrated.
  • Company has said that no product in the US business contributes >20% of the US revenues and it does not see any signs of competition in the near term in Mycophenolate.
  • Going ahead, FCF generation is likely to go up.

Technical View:

Alkem Laboratories Ltd share price is currently trading at Rs2,079, down Rs29.85, or 1.42%, from its previous close of Rs2,108.85 on the BSE. The scrip opened at Rs2,105 and has touched a high and low of Rs2,142.80 and Rs2,028, respectively. So far, 3,54,369 (NSE+BSE) shares have been traded on the counter. The current market cap of the company is Rs25,214.47cr.

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