Technology

For 1QFY2017, Alembic Pharmaceuticals posted sales of Rs727cr V/s Rs583cr in 1QFY2016, ie a yoy growth of 24.8%. Formulations
(Rs607.6cr) grew 29.3% yoy, while API (Rs128cr) grew 7.0% yoy. On the operating
profit front, the OPM came in at 21.4% V/s 17.4% in 1QFY2016 and V/s 22.7%
expected. Expansion in the OPM was mainly on back of gross margin expansion
to 73.7% (V/s 63.4% in 1QFY2016). R&D Exp during the quarter was 10.9% of
sales V/s 8.2% in 1QFY2016. This led the company to post an Adj. net profit of
Rs104cr V/s Rs72cr in 1QFY2016, a yoy growth of 44.6%. We maintain our Neutral
rating.
Results below expectations: For 1QFY2017, the company posted sales of Rs727cr
V/s Rs780cr expected and V/s Rs583cr in 1QFY2016, a yoy growth of 24.8%.
Formulations (Rs607.6cr) grew 29.3% yoy, while API (Rs128cr) grew by 7.0% yoy.
The formulations growth was driven by international formulations (Rs309cr)
posting a yoy growth of 72.0%, while Indian formulations (Rs278cr) grew 6.0%
yoy. On the operating front, the OPM came in at 21.4% V/s 17.4% in 1QFY2016
and V/s 22.7% expected. Expansion in the OPM was mainly on back of gross
margin expansion to 73.7% (V/s 63.4% in 1QFY2016). This led the company to
post an Adj. net profit of Rs104cr V/s Rs72cr in 1QFY2016, a yoy growth of 44.6%.
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.
We recommend a Neutral rating on the stock.

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