ICICI Direct's research report on Alembic Pharma
Alembic Pharma’s Q3FY19 results were better-than-expected on the profitability front whereas revenues were in line Revenues grew 21.2% YoY to Rs 1018.2 crore (I-direct estimate: Rs 1019.5 crore) on account of 44.1% YoY growth in the international business to Rs 448 crore (I-direct estimate: Rs 447.5 crore) led by sharp growth in ex-US businesses. Domestic formulations grew 4.6% to Rs 365 crore, came in line with I-direct estimates EBITDA margins improved 147 bps YoY to 23.8% (I-direct estimate: 20.0%) mainly due to improvement in gross margins (75.6% vs. 73% in Q3FY18). EBITDA grew 29.2% YoY to Rs 242.2 crore vis-à-vis I-direct estimate of Rs 204 crore Net profit grew 30.0% YoY to Rs 169.8 crore (I-direct estimate of Rs 140.6 crore) mainly due to a strong operational performance.
Outlook
Just like Q2, the Q3 numbers also received boost from three to four shortage driven opportunities in the US. Domestic growth was muted due to high base of inventory adjustment. With the aggressive R&D and capex plans, the management has signalled its long term strategy for the next five to six years, especially on the US front. This includes a foray into niche areas like oncology, injectables, derma, etc. We believe this is fraught with a new set of challenges. The benefits are most likely to be back-loaded. Immediate cash burn is likely to weigh on sentiments in the near term. We roll over to FY21E. Accordingly, we arrive at our new target price of Rs 620 based on 22x FY20E EPS of Rs 28.
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