Alembic Pharma - Nirmal bang, report

rage
ge
Alembic Pharma Ltd.
Q4FY13 Result Update – 06 May 2013
4
Recommendation HOLD
Operational efficiency led to better performance
 Domestic business grew by 14% yoy where as exports continue to play spoilsport and grew by meager 5% yoy during the quarter on back of capacity constraints
 Overall sales grew by 11% yoy to Rs 376.4 cr. Because of seasonality factor sequential numbers are not comparable
 The positive surprise came from margins side as EBITDA margins improved to 17.4% as compared to 12.1% in Q4FY12, supported by better product mix and higher economies of scale.
 Strong operational performance and Lower interest expense (as Debt has reduced from Rs 353 cr as on Mar’12 to Rs 185 cr) led to 115% YoY growth in net profit, much higher than our expectation of Rs 28.4cr
 APL has strong product pipeline of 34ANDAs pending approvals, which shows the research capacities of the company and also provides for the revenue visibility. The company expects 8-10 product launches every year in US markets. Cumulative ANDAs stand at 57 and DMF 60
 APL managed to substantially reduce the debt on its books from Rs 305cr at the end of FY12 to Rs 185 cr at the end of FY13 as the cross holdings on Alembic Ltd has been removed. Current Debt : Equity ratio is 0.3x which reflects the sound financial policies followed by the company. It also provides scope for expansion by fund raising if the need arise. Management believes that it can be further reduced to below Rs 100 cr by FY14.
 The company didn’t provide any quantative number the its recent big win – Desvenlafaxine Base – a 505 (b) (2) launch, however expects to garner reasonable revenues in the next 18-21 months window it has.
 The management has given healthy outlook of overall 20% growth escorted by 30-35% in international generics (as new formulation facility has partially go operated easing the capacity constraints), 15% in domestic formulations and 10% in API. Management has also maintained 100-125 bps improvement in EBITDA margins going forward.
Valuation & Recommendation
Considering the improving margins with steady growth, We recommend investors to BUY the stock on declines with price target of Rs 138 (10x of FY15E EPS), an upside of 13.4% from current levels

�� -->