Hikal Ltd - Result Update - ICICI Securities

Q4FY20 revenues fell 17.2% YoY to Rs. 379 crore due to the temporary shutdown of the company's manufacturing facilities and ~Rs. 50 crore sales deferral due to Covid-19. Crop protection segment fell 23% to Rs. 153 crore whereas pharma segment de-grew 12.7% to Rs. 226 crore. EBITDA margins stayed stable at 18.6% (up 28 bps YoY) with a 564 bps increase in GM (48.8%) offset by higher staff & other expenses. Subsequently, EBITDA de-grew 15.9% to Rs. 70.6 crore. Net profit declined 26.6% YoY to Rs. 24.5 crore.

Valuation & Outlook

Hikal had a difficult FY20 in which flooding, NGT issues, planned shutdown besides Covid related disturbances at the fag end of the year created significant headwinds in an otherwise steady business model. The silver lining, if any, was that despite negative operating leverage, the margin performance stayed steady on the back of a judicious product mix and focus on backward integration besides cost control measures. Going ahead, the management expects a margin improvement from this year onwards on the back of several cost rationalisation and efficiency improvement measures undertaken during the pandemic. Going by the capex guidance, (Rs. 300 crore out of which remaining Rs. 140 crore to be spent through FY21) things are looking promising for FY22. Hikal remains a fair value proposition as it continues to expand in both pharma, crop protection segments with separate focus and a calibrated approach. This bodes well in the current scenario when Chinese supply disturbances, government incentives are likely to create opportunities for Indian players both in APIs, crop protection CDMO. We arrive at a valuation of Rs. 165 based on 12x FY22E EPS of Rs. 13.8.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Hikal_Q4FY20.pdf

Shares of HIKAL LTD. was last trading in BSE at Rs.127.7 as compared to the previous close of Rs. 117.15. The total number of shares traded during the day was 611766 in over 11275 trades.

The stock hit an intraday high of Rs. 134.9 and intraday low of 119. The net turnover during the day was Rs. 79001368.

Source : Equity Bulls

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