Alembic Pharma (Q3 FY21) - 'First signs of sartans weakness' - YES Securities

Our view: Sartans contribution saw first significant erosion after multiple quarters though US sales still hovered around US$70mn in Q3. We reckon focus would be on the ex-sartans portfolio which should pick up on back of incremental approvals. Expect US sales to consolidate over next 12-18 months till new facilities see ANDA approvals post inspection. In the meanwhile, domestic business and ROW sales would add to the growth. Continue to factor in margin decline in FY22 and FY23 and a pick up thereafter. Tweak FY21 and FY22 estimates by 3-5% based on continued lower tax rate as seen in Q3 FY21 but retain BUY based on unchanged 25x PE and TP of Rs1,280.

Q3 call highlights

- EBITDA margin - should be in the range of 27-30%.

- The company has planned to launch 5+ products in 4QFY21E.

- Associate company has reported a profit for the first time and reflected in the consol PAT.

- Capex of Rs2bn and Rs5bn in 9m FY21 along with Rs17bn in CWIP.

- Domestic business: Cold & Cough market is under performing due to which the company is also underperforming in the segment.

- India growth driven by old products and new products launches will take time to pick up

- Lost some market share in Sartans and bulk of loss in US sales is attributed to sartans

- US sales would be similar to US$70mn going ahead

- US sales expectation by FY24 between US$400-500mn

- Can add 2-3 more injectable lines once the injectable facility is inspected and approved

- Stepping up investments on API; cumulative investment of Rs4-5bn on API and injectables over next 2 years

- Hopeful of FDA inspection in the next 2 quarters

- R&D will come down to 9-10% of sales once the facilities are commercialized and revenues kick in

- In Timolol - there is good opportunity for the company (currently only the innovator and Sandoz are there in the market, but still there is supply shortage, which will provide the company with a good growth prospect).

- R&D at Rs6.3bn for FY21 and Rs7-7.5bn in FY22

- Negligible sales at Aleor derma JV and there is loss in the JV due to limited number of products in the portfolio

- During the quarter, the company has filed for 1 ANDA filling, they have also received 6 final approvals from USFDA.

- YTDFY21 the company has filed for 16 ANDA approvals. They have received 12 final approvals.

- Out of the total of 137 approvals, 110 approvals are from the oral solids, 13 from ophthalmic, 13 from Derma and 1 from injectables.

- The company till date has launched 89 products (in 3QFY21 the company has launched 7 products).

Shares of ALEMBIC PHARMACEUTICALS LTD. was last trading in BSE at Rs.1029.9 as compared to the previous close of Rs. 1070.1. The total number of shares traded during the day was 45522 in over 3284 trades.

The stock hit an intraday high of Rs. 1090.75 and intraday low of 1025. The net turnover during the day was Rs. 48028457.

Source : Equity Bulls

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