Syngene International - Q1FY21 Result Update - ICICI Securities

Q1FY21 revenues remained flat YoY at ~Rs. 422 crore (up 0.2%) led by growth in Discovery Services and steady traction in Dedicated R&D segment. A 30.6% QoQ decline in revenues was on account of temporary Covid-related shutdown across all segments. Despite higher employee cost and other expenditure, EBITDA margins were up 76 bps YoY at 29.5% on the back of better gross margins. Subsequently, EBITDA grew 2.8% YoY to Rs. 124 crore. Net profit de-grew 19.4% YoY to Rs. 58 crore. Delta vis-a-vis EBITDA was mainly due to higher depreciation.

Valuation & Outlook

Steady Q1 numbers despite Covid-19 related BCP challenges, validate the stickiness of the business in a tough environment. We expect revenues to be back on track, going ahead, as the company is currently operating at 90% capacity. The management has guided for double-digit revenue growth on the back of continuous client additions, an extension of existing contracts, increasing manufacturing and biological contributions besides currency tailwinds. Profitability is likely to be muted due to incremental opex and higher depreciation. The company remains aggressive on the capex front (~US$463 million already spent & another ~US$87 million earmarked by FY21), attributable to order book visibility. Asset turnover from this mega capex will be a significant determinant of improvement in return ratios, going ahead. With elite client additions like Amgen, Zoetis, Herbalife, GSK, etc, and multiple year extension of BMS and Baxter contracts, the company remains well poised to capture opportunities in the global CRO space. We remain positive on the company despite the recent run-up in the stock and arrive at a target price of Rs. 485 based on ~38x FY22 EPS of Rs. 12.8.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Syngene_Q1FY21.pdf

Shares of Syngene International Ltd was last trading in BSE at Rs.437.5 as compared to the previous close of Rs. 419.05. The total number of shares traded during the day was 50688 in over 2590 trades.

The stock hit an intraday high of Rs. 440.9 and intraday low of 419.7. The net turnover during the day was Rs. 21901843.

Source : Equity Bulls

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