Indoco Remedies - Q4FY20 Result Update - ICICI Securities

Q4FY20 revenues grew 7.9% YoY to Rs. 272 crore despite supply chain issues and the ban on Paracetamol exports in March due to Covid-19. EBITDA margins expand 97 bps YoY to 12.2%. Gross margins were boosted by better product mix and milestone payments in US, partially offset by higher domestic promotional and incentive costs at EBITDA margin level. Subsequent EBITDA grew 17.2% YoY to Rs. 33 crore. However, lower other income and higher tax led to 53.4% YoY decline in net profit to Rs. 5.4 crore.

Valuation & Outlook

Despite sales deferral of Rs. 10-15 crore due to Covid-19, Indoco posted steady growth in the quarter. The management has guided for significant export growth and margin improvement for FY21. Growth in FY20 was led by a recovery in both domestic and export markets (albeit on lower base) and strong gross margins. After going through rough patches through FY18 to FY19, where the company faced headwinds on the domestic front (structural issues) and the exports front (regulatory setbacks) the situation is returning to normalcy. While FY21 growth in the domestic market is likely to be subdued on account of Covid-19, with easing logistical challenges and removal of ban on Paracetamol, good traction is expected on the exports front with regulatory overhangs (except WL to Goa I) waning. Normalisation of exports dispatches is likely to improve operating leverage as well. With better visibility, we expect the company to maintain consistency in coming quarters. Hence, we upgrade Indoco to BUY. We arrive at a target price of Rs. 260 based on ~18x FY22 EPS of Rs. 14.3.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Indoco_Q4FY20.pdf

Shares of INDOCO REMEDIES LTD. was last trading in BSE at Rs.208.25 as compared to the previous close of Rs. 210.9. The total number of shares traded during the day was 14795 in over 988 trades.

The stock hit an intraday high of Rs. 215.65 and intraday low of 206.25. The net turnover during the day was Rs. 3132891.

Source : Equity Bulls

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