Technology

Alembic Pharmaceuticals’ 4QFY2016 results have come in below our
expectations, on the sales front. The company posted sales of Rs626cr (V/s Rs763cr
expected) for the quarter, registering a yoy growth of 24.7%. The growth in sales
was driven by international formulations (Rs190.2cr) which grew 20% yoy, while
Indian formulations (Rs259.6cr) grew 12% yoy. On the operating front, the EBIDTA
margin stood at 22.7% V/s 20.0% expected. The net profit at Rs91.2cr (V/s Rs93.4cr
expected), grew 29.7% yoy. We maintain our Neutral rating on the stock.
Results below expectations: The company posted sales of Rs626cr (V/s Rs763cr
expected), registering a yoy growth of 24.7%. The growth in sales was driven by
international formulations (Rs190.2cr) which grew 20% yoy, while Indian
formulations (Rs259.6cr) grew 12% yoy. The API business (Rs166.9cr) posted a 95%
yoy growth. On the operating front, the EBIDTA margin stood at 22.8% 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. The company posted a net profit of Rs91.2cr (V/s Rs93.4cr expected),
up 29.7% yoy.
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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