Technology

For 1QFY2017, the company posted sales of Rs253cr V/s Rs220cr expected and V/s
Rs216cr in 1QFY2016, a yoy growth of 17.0%. The formulations (Rs234.5cr) grew
14.8% yoy while API (Rs175.9cr) grew 40.8% yoy. On the operating profit front, the
OPM came in at 14.7% V/s 16.3% in 1QFY2016 and V/s 17.0% expected. The
dip in the OPM was mainly on back of 85.0% yoy rise in R&D expenses, which
were around 4.7% V/s 3.0% in 1QFY2016. This led the company to post an Adj.
net profit of Rs19.7cr V/s Rs20.8cr in 1QFY2016, a yoy de-growth of 4.9%. We
maintain our Sell rating.
Results lower than expected: For 1QFY2017, the company posted sales of Rs253cr
V/s Rs220cr expected and V/s Rs216cr in 1QFY2016, a yoy growth of 17.0%. The
formulations (Rs234.5cr) grew 14.8% yoy while API (Rs175.9cr) grew 40.8% yoy.
Formulations growth was driven by domestic formulations (Rs142.1cr) which grew
12.7% yoy while export (Rs92.3cr) grew 18.4% yoy. On the operating profit front,
the OPM came in at 14.7% V/s 16.3% in 1QFY2016 and V/s 17.0% expected. A
dip in the OPM was mainly on back of 85.0% yoy rise in R&D expenses, which
were around 4.7% V/s 3.0% in 1QFY2016. This led the company to post an Adj.
net profit of Rs19.7cr V/s Rs20.8cr in 1QFY2016, a yoy de-growth of 4.9%.
Outlook and valuation: We expect net sales to post a 14.9% CAGR to Rs1,289cr
and EPS to post a 31.5% CAGR to Rs15.6 over FY2016-18E. At the current market
price, the stock is trading at 23.7x and 20.1x its FY2017E and FY2018E earnings,
respectively. We recommend a SELL rating.

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