4QFY2016 Result Update | Pharmaceutical
May 9, 2016
Alembic Pharma
NEUTRAL
CMP
`600
Performance Highlights
Target Price
-
Y/E March (` cr)
4QFY2016 3QFY2016
% chg (qoq) 4QFY2015
% chg (yoy)
Investment Period
-
Net Sales
626
921
(32.1)
502
24.7
Other Income
4
4
3.4
3
21.3
Stock Info
Operating Profit
142
384
(62.9)
97
46.7
Sector
Pharmaceutical
Interest
1
1
25.0
0
Market Cap (` cr)
11,301
Net Profit
91
269
(66.2)
70
29.6
Net Debt (` cr)
814
Source: Company, Angel Research
Beta
0.7
52 Week High / Low
792/452
Alembic Pharmaceuticals’ 4QFY2016 results have come in below our
Avg. Daily Volume
28,108
expectations, on the sales front. The company posted sales of `626cr (V/s `763cr
Face Value (`)
2
expected) for the quarter, registering a yoy growth of 24.7%. The growth in sales
BSE Sensex
25,102
was driven by international formulations (`190.2cr) which grew 20% yoy, while
Nifty
7,707
Indian formulations (`259.6cr) grew 12% yoy. On the operating front, the EBIDTA
Reuters Code
ALEM.BO
margin stood at 22.7% V/s 20.0% expected. The net profit at `91.2cr (V/s `93.4cr
Bloomberg Code
[email protected]
expected), grew 29.7% yoy. We maintain our Neutral rating on the stock.
Results below expectations: The company posted sales of `626cr (V/s `763cr
Shareholding Pattern (%)
expected), registering a yoy growth of 24.7%. The growth in sales was driven by
international formulations
(`190.2cr) which grew
20% yoy, while Indian
Promoters
74.1
formulations (`259.6cr) grew 12% yoy. The API business (`166.9cr) posted a 95%
MF / Banks / Indian Fls
3.0
yoy growth. On the operating front, the EBIDTA margin stood at 22.8% V/s 20.0%
FII / NRIs / OCBs
11.1
expected. The gross margin expanded to 80.2% V/s 65.3% in the corresponding
Indian Public / Others
11.8
period of last year; however the expansion in the OPM was relatively lower as
R&D expenditure during the quarter stood at 17.8% of sales V/s 6.1% of sales in
Abs. (%)
3m 1yr
3yr
4QFY2015. The company posted a net profit of `91.2cr (V/s `93.4cr expected),
Sensex
3.1
(8.7)
28.2
up 29.7% yoy.
Alembic Pharma
(5.3)
27.2
391.4
Outlook and valuation: Over FY2016-18E, we expect the company to post a
CAGR of 13.9% in sales, while profitability will be under pressure on back of
higher R&D spend, which is likely to reach 13-14% of sales in FY2017-FY2018E.
3-year price chart
We recommend a Neutral rating on the stock.
Key Financials (Consolidated)
Y/E March (` cr)
FY2015
FY2016
FY2017E
FY2018E
Net Sales
2,053
3,145
3,483
4,083
% chg
10.2
53.2
10.8
17.2
Net Profit
283
720
352
447
% chg
20.0
154.1
(51.1)
27.0
EPS (`)
15.0
38.2
18.7
23.7
EBITDA Margin (%)
19.5
31.9
16.2
17.4
Source: Company, Angel Research
P/E (x)
39.9
15.7
32.2
25.3
RoE (%)
36.3
57.9
20.1
21.3
RoCE (%)
30.2
51.0
22.0
23.5
P/BV (x)
12.8
7.1
6.0
4.9
Sarabjit Kour Nangra
EV/Sales (x)
5.6
3.5
3.2
2.7
+91- 22- 36357600 - 6806
EV/EBITDA (x)
28.5
10.9
19.6
15.3
[email protected]
Source: Company, Angel Research; Note: CMP as of May 4, 2016
Please refer to important disclosures at the end of this report
1
Alembic Pharma | 4QFY2016 Result Update
Exhibit 1: 4QFY2016 performance (Consolidated)
Y/E March (` cr)
4QFY2016
3QFY2016
% chg (qoq) 4QFY2015
% chg (yoy) FY2016 FY2015
% chg (yoy)
Net sales
626
921
(32.1)
502
24.7
3,145
2,053
53.2
Other income
4
4
3.4
3
21.3
9
6
51.7
Total income
629
925
505
24.6
3,154
2,059
Gross profit
502
715
(29.8)
328
52.9
2376
1338
77.6
Gross margin
80.2
77.6
65.3
75.5
65.2
Operating profit
142
384
(62.9)
97
46.7
1002
400
150.6
Operating margin (%)
22.7
41.7
19.3
31.9
19.5
Interest
1
1
25.0
0
4
2
84.0
Depreciation
24
22
12.7
11
121.8
72
44
64.1
PBT
120
365
(67.0)
89
35.1
936
359
160.6
Provision for taxation
29
95
(69.9)
19
47.9
216
76
184.2
PAT before Extra-ordinary item
91
269
(66.2)
70
29.6
720
283
154.3
Extra-Ordinary Expenses
0
0
0
0
0
PAT after Extra-ord. item & MI
91
269
(66.2)
70
29.6
720
283
154.3
EPS (`)
4.8
14.3
3.7
38.2
15.0
Source: Company, Angel Research
Exhibit 2: 4QFY2016 - Actual vs Angel estimates
(` cr)
Actual
Estimates
Variation (%)
Net Sales
626
763
(18.0)
Other Income
4
4
4.0
Operating Profit
142
145
(1.9)
Interest
1
1
0.0
Tax
29
29
(0.0)
Net Profit
91
93
(2.4)
Source: Company, Angel Research
Sales below expectation: Alembic Pharma’s 4QFY2016 results are below
expectation on the sales front. The company posted sales of `626cr (V/s `763cr
expected), up 24.7% yoy.
The growth in sales was driven by the international formulations business
(`190.2cr) which posted a yoy growth of
20%, while Indian formulations
(`259.6cr) posted a 12% yoy growth. The growth in the Indian formulations
segment was driven by the specialty segment which grew by 13% yoy, while the
acute segment grew by 7% yoy during the period. During FY2016, the specialty
segment had a 60% share in domestic formulations while the rest was accounted
by the acute segment (40%). The API business (`166.9cr) posted a growth of 95%
yoy. The Indian generic segment on the other hand posted a dip of 46% yoy.
Till date, the company has filed 76 products (2 in 4QFY2016), received 47
approvals (2 in 4QFY2016) and launched 29 products in the market. The
remaining 27 ANDA filings are primarily para IVs and attractive opportunities for
the company. The company has also launched 11 products through its own front
end in the US.
May 9, 2016
2
Alembic Pharma | 4QFY2016 Result Update
Exhibit 3: Sales trend
1,080
1,008
921
880
680
626
582
502
480
280
4QFY2015
1QFY2016
2QFY2016
3QFY2016
4QFY2016
Source: Company, Angel Research
OPM higher than expectation: On the operating front, the EBIDTA margin stood at
22.7% V/s 20.0% expected. The gross margin expanded to 80.2% V/s 65.3% in
the corresponding period of last year; however the expansion in the OPM was
relatively lower as R&D expenditure during the quarter stood at 17.8% of sales V/s
6.1% of sales in 4QFY2015. For FY2016, R&D expenditure was 9.7% of sales. The
gross margins expanded on back of favorable product mix and booking of
disproportionate profit share from Abilify sales.
Exhibit 4: OPM Trend (%)
45.0
41.7
40.0
37.2
35.0
30.0
25.0
22.7
19.3
20.0
17.4
15.0
4QFY2015
1QFY2016
2QFY2016
3QFY2016
4QFY2016
Source: Company, Angel Research
Net profit below expectation: The company posted a net profit of `91.2cr (V/s
`93.4cr expected), ie a yoy growth of 29.7%.
May 9, 2016
3
Alembic Pharma | 4QFY2016 Result Update
Exhibit 5: Net profit trend
350
269
289
300
269
250
200
150
70
91
100
50
0
4QFY2015
1QFY2016
2QFY2016
3QFY2016
4QFY2016
Source: Company, Angel Research
Concall highlights
The company has guided for `450cr spend for FY2017. Till now the company
was focusing upon oral solids filings in the US. However, going forward it
would be focusing upon niche filings in the area of oncology orals &
injectables and derma products (through JV with Orbicular).
The company has given `400cr of capex guidance for FY2017.
483 observations at Panelav facility although non-serious in nature; no data
integrity issue found.
Investment arguments
Focus on chronic segment to drive domestic formulation growth: Alembic Pharma
has been restructuring its business portfolio, which would aid in improving its
growth and operating performance. The company’s domestic formulation business
contributed 44% to its total sales in FY2016. The company has a strong field force
of ~3,600 medical representatives. Going forward, the company expects its
domestic formulation business to at least grow in line with the industry growth rate,
before it sees an improvement in the share of the high growth chronic segment.
For FY2016-18E, we expect the domestic formulation business to grow at a CAGR
of 15.0%.
Exports- US the key growth driver: On the exports front, the formulation business
contributed by 30% to the total turnover, with majority of the contribution coming
from Europe and the US. In the US, the company has filed for ~76 ANDAs till date
and received 47 approvals. The company, going forward, expects to keep its
momentum high in terms of number of filings, by filing around 10-12 ANDAs per
annum. For FY2016-18E, we expect exports to register a CAGR of 13.6%, mainly
on back of base effect impact of FY2016 (sales grew by 46%, due to launch of
Abilify).
Outlook and valuation: Over FY2016-18E, we expect the company to post a
CAGR of 13.9% in sales, while profitability will be under pressure on back of
May 9, 2016
4
Alembic Pharma | 4QFY2016 Result Update
higher R&D spend, which is likely to reach 13-14% of sales in FY2017-FY2018E.
We recommend a Neutral rating on the stock.
Exhibit 6: Key assumptions
FY2017E
FY2018E
Domestic formulation sales growth (%)
16.0
14.0
Exports sales growth (%)
8.0
20.0
R&D as % of sales
14.0
13.0
Operating margins (%)
16.2
17.4
Capex (` cr)
400
200
Net Debt/Equity (x)
(0.1)
(0.2)
Source: Company, Angel Research
Exhibit 7: Recommendation summary
Reco.
CMP Tgt Price Upside
FY2017E
FY15-17E
FY2017E
(`)
(`)
(%) PE (x) EV/Sales (x) EV/EBITDA (x)
CAGR in EPS (%) RoCE (%) RoE (%)
Alembic Pharma
Neutral
600
-
-
25.3
2.7
15.3
11.4
23.5
21.3
Aurobindo Pharma Accumulate
812
856
5.4
19.0
3.0
13.2
15.6
23.5
30.2
Cadila Healthcare
Accumulate
322
352
9.2
18.3
3.6
16.5
24.6
25.2
29.0
Cipla
Accumulate
533
605
13.4
19.4
3.2
16.1
18.3
16.7
16.1
Dr Reddy's
Buy
2,933
3,933
34.1
16.4
2.4
10.6
17.2
19.1
20.4
Dishman Pharma
Neutral
165
-
-
16.5
1.8
8.2
15.9
9.4
11.0
GSK Pharma
Neutral
3,623
-
-
53.0
9.3
42.1
6.6
33.7
34.3
Indoco Remedies
Neutral
271
-
-
19.9
2.2
11.9
23.0
19.7
19.7
Ipca labs
Buy
487
750
54.2
17.4
1.8
9.7
17.9
11.8
14.9
Lupin
Neutral
1,578
-
-
23.1
3.9
14.6
13.1
29.6
24.7
Sanofi India*
Accumulate
4,410
4,738
7.4
28.7
4.7
22.9
34.2
21.0
25.6
Sun Pharma
Neutral
803
950
18.3
29.8
5.2
17.1
8.4
15.8
16.6
Source: Company, Angel Research; Note: *December year end
Company Background
Alembic Pharmaceuticals is a leading pharmaceutical company in India. The
company is vertically integrated to develop pharmaceutical substances and
intermediates. The company is a market leader in the Macrolides segment of
anti-infective drugs in India. Its manufacturing facilities are located in Vadodara
and in Baddi (Himachal Pradesh; for the domestic and non-regulated export
market). The Panelav facility houses the API and formulation manufacturing (both
USFDA approved) plants.
May 9, 2016
5
Alembic Pharma | 4QFY2016 Result Update
Profit & Loss Statement (Consolidated)
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
Gross sales
1,871
2,064
3,181
3,522
4,128
Less: Excise duty
8
11
36
39
45
Net sales
1,863
2,053
3,145
3,483
4,083
Other operating income
3.2
5.7
3.6
3.6
3.6
Total operating income
1,866
2,058
3,149
3,487
4,087
% chg
22.8
10.3
53.0
10.7
17.2
Total expenditure
1,506
1,653
2,143
2,918
3,373
Net raw materials
713
715
769
1,184
1,388
Other mfg costs
82
90
138
153
180
Personnel
247
307
421
506
607
Other
463
542
814
1,075
1,198
EBITDA
358
400
1,002
565
710
% chg
43.7
11.7
150.9
(43.6)
25.6
(% of Net Sales)
19.2
19.5
31.9
16.2
17.4
Depreciation& amortisation
40
44
72
99
120
Interest & other charges
10
2
4
10
11
Other income
0
0
6
-
-
(% of PBT)
0
0
-
-
-
Share in profit of Associates
-
-
-
-
-
Recurring PBT
308
360
936
457
580
% chg
49.4
16.8
160.2
(51.2)
27.0
Extraordinary expense/(Inc.)
-
-
-
-
-
PBT (reported)
308
360
936
457
580
Tax
75
76
216
105
133
(% of PBT)
24.4
21.2
23.1
23.0
23.0
PAT (reported)
236
283
720
352
447
Add: Share of earnings of asso.
-
-
(0)
-
-
Less: Minority interest (MI)
-
-
-
-
-
Prior period items
-
-
-
-
-
PAT after MI (reported)
236
283
720
352
447
ADJ. PAT
236
283
720
352
447
% chg
43.0
20.0
154.1
(51.1)
27.0
(% of Net Sales)
12.7
13.8
22.9
10.1
10.9
Basic EPS (`)
12.5
15.0
38.2
18.7
23.7
Fully Diluted EPS (`)
12.5
15.0
38.2
18.7
23.7
% chg
43.0
20.0
154.1
(51.1)
27.0
May 9, 2016
6
Alembic Pharma | 4QFY2016 Result Update
Balance Sheet (Consolidated)
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
SOURCES OF FUNDS
Equity share capital
37.7
37.7
37.7
37.7
37.7
Preference Capital
-
-
-
-
-
Reserves & surplus
638
847
1,563
1,860
2,252
Shareholders funds
676
885
1,601
1,898
2,290
Minority Interest
Other Long Term Liabilities
12.7
15.8
33.9
14.3
14.3
Long Term Provisions
6.7
6.4
7.4
7.4
7.4
Total loans
78
239
133
150
150
Deferred tax liability
23
31
50
50
50
Total liabilities
795
1,177
1,824
2,119
2,511
APPLICATION OF FUNDS
Gross block
665
907
1,208
1,608
1,808
Less: acc. depreciation
268
313
385
483
603
Net block
397
595
824
1,125
1,206
Capital work-in-progress
21
-
-
-
-
Goodwill
-
35
44
-
-
Long Term Loans and Adv.
42
118
83
83
83
Investments
3.4
2.3
2.1
3.3
3.3
Current assets
755
891
1,507
1,848
2,321
Cash
24
55
451
291
496
Loans & advances
147
120
409
453
531
Other
584
716
647
1,104
1,294
Current liabilities
422
464
635
940
1,102
Net current assets
333
426
872
908
1,219
Mis. Exp. not written off
-
-
-
-
-
Total assets
795
1,177
1,824
2,119
2,511
May 9, 2016
7
Alembic Pharma | 4QFY2016 Result Update
Cash Flow Statement (Consolidated)
Y/E March (` cr)
FY2014 FY2015 FY2016 FY2017E FY2018E
Profit before tax
308
360
936
457
580
Depreciation
40
44
72
99
120
(Inc)/Dec in Working Capital
(84)
66
191
(465)
43
Less: Other income
-
-
-
-
-
Direct taxes paid
75
76
216
105
133
Cash Flow from Operations
190
393
982
(15)
609
(Inc.)/Dec.in Fixed Assets
(81)
(222)
(301)
(400)
(200)
(Inc.)/Dec. in Investments
-
-
-
-
-
Other income
-
-
-
-
-
Cash Flow from Investing
(81)
(222)
(301)
(400)
(200)
Issue of Equity
-
-
-
-
-
Inc./(Dec.) in loans
(109)
164
(87)
(2)
-
Dividend Paid (Incl. Tax)
(55)
(55)
(55)
(55)
(55)
Others
(34)
184
160
51
51
Cash Flow from Financing
(197)
293
19
(6)
(4)
Inc./(Dec.) in Cash
8
31
396
(160)
205
Opening Cash balances
16
24
55
451
291
Closing Cash balances
24
55
451
291
496
May 9, 2016
8
Alembic Pharma | 4QFY2016 Result Update
Key Ratios
Y/E March
FY2014
FY2015
FY2016
FY2017E
FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
47.9
39.9
15.7
32.2
25.3
P/CEPS
40.9
34.5
14.3
25.1
20.0
P/BV
16.7
12.8
7.1
6.0
4.9
Dividend yield (%)
0.4
0.4
0.4
0.4
0.4
EV/Sales
6.1
5.6
3.5
3.2
2.7
EV/EBITDA
31.7
28.5
10.9
19.7
15.4
EV / Total Assets
14.3
9.7
6.0
5.2
4.3
Per Share Data (`)
EPS (Basic)
12.5
15.0
38.2
18.7
23.7
EPS (fully diluted)
12.5
15.0
38.2
18.7
23.7
Cash EPS
14.7
17.4
42.0
23.9
30.0
DPS
2.5
2.5
2.5
2.5
2.5
Book Value
35.8
46.9
84.9
100.7
121.5
Dupont Analysis
EBIT margin
17.0
17.3
29.6
13.4
14.5
Tax retention ratio
75.6
78.8
76.9
77.0
77.0
Asset turnover (x)
2.5
2.2
2.5
2.2
2.1
ROIC (Post-tax)
32.5
29.6
57.4
22.5
23.7
Cost of Debt (Post Tax)
5.6
0.9
1.5
5.4
5.4
Leverage (x)
0.2
0.1
0.0
0.0
0.0
Operating ROE
38.2
33.8
57.6
22.5
23.7
Returns (%)
ROCE (Pre-tax)
39.9
30.2
51.0
22.0
23.5
Angel ROIC (Pre-tax)
44.5
38.7
77.0
29.5
30.7
ROE
40.0
36.3
57.9
20.1
21.3
Turnover ratios (x)
Asset Turnover (Gross Block)
3.0
2.6
3.0
2.5
2.4
Inventory / Sales (days)
56.5
61.5
54.1
68.4
72.5
Receivables (days)
49.5
56.3
43.5
56.3
62.3
Payables (days)
79.8
79.3
37.8
39.7
44.6
WC cycle (ex-cash) (days)
58.6
60.3
45.9
54.3
59.8
Solvency ratios (x)
Net debt to equity
0.1
0.2
(0.2)
(0.1)
(0.2)
Net debt to EBITDA
0.2
0.5
(0.3)
(0.2)
(0.5)
Interest Coverage (EBIT / Int.)
32.3
199.5
252.8
47.2
56.2
May 9, 2016
9
Alembic Pharma | 4QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
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/dealing in securities Market. Angel or its associates including its relatives/analyst do not hold any financial interest/beneficial
ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any compensation /
managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst
has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity
of the company covered by Analyst.
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decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
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the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from
or in connection with the use of this information.
Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Alembic Pharma
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
May 9, 2016
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