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Strong sequential improvement in sales
2QFY12 sales of INR10.5bn (23% y-y, 10.7% q-q) were significantly
higher than our expectations. The key surprise was a strong pick-up in
the generics business, which increased by US$24mn sequentially. As
per company, growth in the generics segment was driven by new
launches, market share gains in existing products (including some
opportunistic market share gain on supply disruptions from the
competition) and some price increases. The company expects to sustain
the current momentum in the business.
Outlook growth positive
Management sounded positive on the growth outlook for 2HFY12. It
expects growth to be driven by new capacities and higher capacity
utilisation. The company recently commissioned a 10000 TPA
Niacinamide and intermediate facility at SEZ in Gujarat. The facility
presents peak sales potential of US$75mn, as per the company, which is
1.76x the FY11 segment sales. The generic and API segment growth is
expected to be driven by patent expiries. Sartans will likely be a key
growth driver in the near term as patents expire over the next 24 months.
JOL has installed one of the largest generic sartan capacities. The
capacity is expected to generate a turnover of US$60mn at full utilisation
at current prices, which is almost 80% of current sales, according to
management.
Margin improvement trend sustains in the quarter
The EBITDA margin in the Life Sciences product business recorded a
substantial improvement of 366bps q-q. The Services business margins
were stable at mid-high teens. The gross margin at 63.16% was the
highest in the last 10 qtrs. A pick-up in volumes, better capacity
utilisation, cost rationalisations and some price increases all contributed
to outperformance at the EBITDA level. EBITDA at INR2.38bn was the
highest ever recorded by the company and substantially higher than our
expectations of INR1.85bn.
MTM losses of INR426m in the quarter
Excluding the unrealised MTM losses in the quarter, the company
reported PAT of INR1.42bn. The company hasn’t taken any hedging
position and hence should benefit if the INR remains at the current level.
As per the company, every INR1 depreciation in the USD/INR exchange
rate can add approximately INR150mn to EBITDA.
Estimates are under review
With 1HFY12 EBITDA at 58% of our full-year projection and an expected
stronger 2HFY12F aided by favourable currency movement, our
estimates are under review. We retain our Buy rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong sequential improvement in sales
2QFY12 sales of INR10.5bn (23% y-y, 10.7% q-q) were significantly
higher than our expectations. The key surprise was a strong pick-up in
the generics business, which increased by US$24mn sequentially. As
per company, growth in the generics segment was driven by new
launches, market share gains in existing products (including some
opportunistic market share gain on supply disruptions from the
competition) and some price increases. The company expects to sustain
the current momentum in the business.
Outlook growth positive
Management sounded positive on the growth outlook for 2HFY12. It
expects growth to be driven by new capacities and higher capacity
utilisation. The company recently commissioned a 10000 TPA
Niacinamide and intermediate facility at SEZ in Gujarat. The facility
presents peak sales potential of US$75mn, as per the company, which is
1.76x the FY11 segment sales. The generic and API segment growth is
expected to be driven by patent expiries. Sartans will likely be a key
growth driver in the near term as patents expire over the next 24 months.
JOL has installed one of the largest generic sartan capacities. The
capacity is expected to generate a turnover of US$60mn at full utilisation
at current prices, which is almost 80% of current sales, according to
management.
Margin improvement trend sustains in the quarter
The EBITDA margin in the Life Sciences product business recorded a
substantial improvement of 366bps q-q. The Services business margins
were stable at mid-high teens. The gross margin at 63.16% was the
highest in the last 10 qtrs. A pick-up in volumes, better capacity
utilisation, cost rationalisations and some price increases all contributed
to outperformance at the EBITDA level. EBITDA at INR2.38bn was the
highest ever recorded by the company and substantially higher than our
expectations of INR1.85bn.
MTM losses of INR426m in the quarter
Excluding the unrealised MTM losses in the quarter, the company
reported PAT of INR1.42bn. The company hasn’t taken any hedging
position and hence should benefit if the INR remains at the current level.
As per the company, every INR1 depreciation in the USD/INR exchange
rate can add approximately INR150mn to EBITDA.
Estimates are under review
With 1HFY12 EBITDA at 58% of our full-year projection and an expected
stronger 2HFY12F aided by favourable currency movement, our
estimates are under review. We retain our Buy rating.
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