Alembic Pharma Ltd - Results are in-line with expectations - Nirmal Bang

Total revenues grew by 14.7% yoy at Rs 339.5 cr. EBITDA margin has improved by 290 bps yoy however, declined by 580 bps qoq at 12.1%.

Key Highlights

- Sequential results are not comparable due to seasonality factor. Q4 is seasonally weak quarter for the company

- Exports drove the sales growth for the quarter as well as for FY12. During the quarter exports grew by 28.1% yoy as compared to domestic growth of 7.5% yoy. For FY12 exports reported impressive growth of 41.2% as compared to 11.3% domestic growth.

- During the quarter R&D expenses have increased substantially to Rs 22.1 cr (6.5% of sales; includes one-time filing cost of NDA of Rs 5 cr) as against Rs 9.1 cr (2.4%) in Q3FY12 and Rs 15.7 cr (5.3%) in Q4FY11, on account of higher filings for European and Brazil regions and more Para IV and 505 (b) (2) filings. We have also incorporated higher R&D cost for future years (4.8% of sales in FY13E and FY14E as compared to 4.0% in FY12)

- The company has filed four ANDAs and three DMFs during the quarter taking the cumulative filings to 45 ANDAs and 62 DMFs. It has received two approvals as well in Q4FY12 taking the total approvals to 19.

- Management expects domestic formulations growth to be strong however it would be limited by current capacity constraints. The management expect 15% growth in FY13 however it also feels that FY14 would be the turnaround year in terms of growth as new capacity would ease the current constraints and it would be able to take the full benefit of increasing demand.

Valuation & Recommendation

For FY12-14, we expect Alembic Pharma's revenues to grow at 15.6%. However, PAT is expected to grow faster i.e. 25.0% during the same period on account of favorable change in product mix, shift from API to formulations, launch of new products and higher economies of scale. We had initially recommended Alembic Pharma on 22nd March 2012 at Rs 43. Since then the stock has given 26% returns. We maintain our "BUY" with a revised target price of Rs. 86 (earlier Rs 97) indicating a potential upside of 59% over next two years. Major reason for revision in numbers is slow down in FY13 numbers due to constraints in capacity and higher R&D expenses.

Source : Equity Bulls

Keywords