Suven Pharmaceuticals - Q2FY21 Company Update - ICICI Securities

Q2 revenues declined 13% YoY to Rs. 237.4 crore mainly due to higher base of one-time pharma contract in Q2FY20. Pharma segment de-grew 30.3% YoY to Rs. 144 crore. Specialty chemicals grew 25.6% YoY to Rs. 68 crore. EBITDA margins contracted 446 bps to 41.5% amid higher employee cost and other expenditure. EBITDA declined 21.5% to Rs. 98.5 crore. PAT declined 20.4% YoY to Rs. 74.1 crore. Delta vis-à-vis EBITDA was mainly due to higher depreciation, lower other income partially offset by lower tax rate.

Valuation & Outlook

Q2 results were lower than I-direct estimates on margin and profitability front. Revenues were in line with I-direct estimates. Despite pandemic and high base, the company has guided 15-20% growth based on strong order book position (albeit some expected delays). Regarding the optically high capex plan of Rs. 600 crore for modernisation and technology upgradation, we believe this has to do with the need to cater to the changed priorities and requirements at the behest of the clients, the benefits of which may be visible in the long run. We continue to emphasise on the strong execution capability and focused approach without the burden of success/failure of the innovative pipeline. We upgrade from HOLD to BUY rating with a target price of Rs. 400 based on 20x on FY23E EPS of Rs. 20.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SuvenPharma_CoUpdate_Oct20.pdf

Source : Equity Bulls

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