Technology

For 1QFY2017, the company posted better than expected sales and OPM while
the net profit missed our estimates. Sales came in at Rs822cr V/s Rs680cr expected
and V/s Rs751cr in 1QFY2016, ie a yoy growth of 9.4%. Formulations (Rs620cr)
posted a yoy growth of 15%, while API (Rs202cr) posted a yoy de-growth of 3%.
On the operating front, the EBITDA margin came in at 13.1% V/s 9.6% expected,
V/s 10.0% in 1QFY2016, and V/s 8.4% in 4QFY2016. Other income (Rs17.4cr)
posted a yoy growth of 56.2%. Thus, the Adj. net profit came in at Rs48cr V/s
Rs52cr expected and V/s Rs28cr in 1QFY2016, a yoy growth of 69.9%. We
maintain our Buy on the stock.
Results better than expected on sales and operating fronts: Sales came in at
Rs822cr V/s Rs680cr expected and V/s Rs751cr in 1QFY2016, ie a yoy growth of
9.4%. Formulations (Rs620cr) posted a yoy growth of 15%, while API (Rs202cr)
posted a yoy de-growth of 3%. Domestic formulation sales (Rs345cr) posted a yoy
growth of 9%, while exports formulation sales (Rs275cr) posted a yoy growth of
22%. Domestic API sales (Rs35cr) posted a de-growth of 37% yoy and exports API
sales (Rs166cr) posted a growth of 9% yoy. On the operating front, the EBITDA
margin came in at 13.1% V/s 9.6% expected, V/s 10.0% in 1QFY2016, and V/s
8.4% in 4QFY2016. Thus, the Adj. net profit came in at Rs48cr V/s Rs52cr
expected and V/s Rs28cr in 1QFY2016, a yoy growth of 69.9%.
Outlook and Valuation: We expect net sales to post a 15.6% CAGR to Rs3,799cr,
and EPS to register a 36.5% CAGR to Rs19.7 over FY2016–18E. The company’s
financials will be impacted by the USFDA import alert on the Ratlam, Indore and
Silvassa facilities. While the problems are likely to persist for a while, we expect the
company’s performance to witness a gradual pick-up going forward. Given the
inexpensive valuations, we maintain our Buy rating on the stock.

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