Alembic Pharma (Q1 FY15)

India Infoline News Service | Mumbai |

Q1 EBIDTA margin up ~280bps yoy but declined marginally on qoq basis as marketing spends (+386bps qoq) for branded segment increased due to launch of new divisions.

CMP Rs338, Target Rs550, Upside 62.7% 
  • Alembic Pharma reported a largely in line quarter with YoY revenue and EBIDTA growth of 15.7% and ~35% respectively

  • India branded business grew 16.3% yoy vs estimated 15% yoy; specialty segment sales increased 25% yoy

  • International generics revenues lower than expected at +33% yoy; company filed 3 ANDAs taking total ANDAs filings to 64 while approval for 3 ANDA proposals received during the quarter 

  • Margins declined 12bps qoq on higher marketing expense but rose ~280bps yoy

  • PAT mostly in line with our forecast; retain previous estimates and 2-yr target price of Rs550 on robust branded domestic business and international generics outlook

Result table
(Rs m) Q1 FY15 Q4 FY14 % qoq Q1 FY14 % yoy
Net sales 4,943 4,640 6.5 4,272 15.7
RM & packing (1,205) (1,350) (10.7) (1,229) (2.0)
Purch of traded goods (565) (413) 36.8 (495) 14.1
Staff (756) (672) 12.6 (564) 34.2
Marketing expenses (520) (309) 68.3 (438) 18.7
R&D (295) (312) (5.4) (224) 31.8
Other expenditure (635) (673) (5.6) (607) 4.7
Operating profit 967 913 5.9 715 35.2
OPM (%) 19.6 19.7 (12) bps 16.7 282 bps
Depreciation (107) (110) (2.5) (95) 12.4
Interest (6) (23) (75.5) (15) (61.9)
Other income 2 28 (93.5) 0
PBT 856 808 5.9 605 41.5
Tax (203) (195) 4.1 (139) 46.3
Effective tax rate (%) 23.7 24.1 (43) bps 22.9 79 bps
Associate share 0 - - - -
Adjusted PAT 653 613 6.6 466 40.1
Adj. PAT margin (%) 13.2 13.2 1 bps 10.9 230 bps
Extra ordinary items (7) - - - -
Reported PAT 647 613 5.5 466 38.7
Source: Company, India Infoline Research

Alembic reports largely in line quarter  

Alembic pharma posted YoY revenue growth of 15.7% at Rs4.9bn vs our estimate of ~Rs5bn driven by healthy rise in India branded business (+16.3% yoy vs est. 15% yoy) and International generics (+33% yoy). Revenues from international generics business were lower than expected as company reduced sales from low margin business (~contract manufacturing types) to focus on high margin products and also due to some impact from pricing adjustments. Company indicated in its post earnings call that new product launches would be reflected in sales from Q3 onwards. Share of specialty segment at 59% of domestic branded business.

EBIDTA margin dips qoq on higher marketing spends

Q1 EBIDTA margin up ~280bps yoy but declined marginally on qoq basis as marketing spends (+386bps qoq) for branded segment increased due to launch of new divisions. Company mentioned that once critical mass is reached in such areas (at least 2 quarters away), the impact would be mitigated. Also staff costs rose 210bps yoy and 83bps qoq driven by addition to field force of 400 people (all in Specialty segment) due to additions of new divisions.


Revenue breakup
Segment (Rs mn) Q1 FY15 Q1 FY14 % yoy
Formulations
India Branded 2,233 1,920 16.3
India Generics 252 265 (4.7)
International Branded 227 150 51.1
International Generics 1,138 855 33.2
API 1,063 1,070 (0.6)
Export incentives 48 29 66.6
Total 4,961 4,288 15.7
Source: Company, India Infoline Research

Retain BUY on robust domestic branded and int’l generics outlook

Alembic has filed 3 ANDAs during the quarter taking cumulative ANDA filings to 64 while it also got 3 ANDA approvals taking cumulative ANDA/NDA approvals to 35 (including 5 tentative approvals). We expect domestic branded business to post high teens growth while international generics too would continue to compound at a robust run rate. Company reiterated its FY15 capex guidance of Rs2.5bn which indicates strong revenue visibility in FY16 and beyond. We stick to our FY15/16/17 estimates and retain BUY with unchanged 2-yr target of Rs550.


Financial summary
Y/e 31 Mar (Rs m) FY14 FY15E FY16E FY17E
Revenues 18,632 22,228 26,996 33,020
yoy growth (%) 22.6 19.3 21.5 22.3
Operating profit 3,577 4,312 5,426 6,967
OPM (%) 19.2 19.4 20.1 21.1
Reported PAT 2,355 2,778 3,605 4,729
yoy growth (%) 42.5 18.0 29.8 31.2
EPS (Rs) 12.5 14.7 19.1 25.1
P/E (x) 27.1 22.9 17.7 13.5
P/BV (x) 1.9 1.4 1.1 0.8
EV/EBITDA (x) 3.9 3.3 2.4 1.6
Debt/Equity (x) 0.2 0.2 0.1 0.0
ROE (%) 40.0 35.6 34.9 34.1
ROCE (%) 39.7 35.8 38.1 38.4
Source: Company, India Infoline Research
 

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