Alembic Pharmaceuticals Limited (APL) has reported strong set of numbers on a quarterly as well as on a
yearly basis exceeding our margin & bottom line estimates. APL recorded a revenue growth of 10.5% &
4% in Q4FY13 & FY13 respectively. However, with a positive surprise on the margins front, APL managed
to record a strong PAT growth of 115% & 27% in Q4FY13 & FY13 respectively. The following are the key
highlights of the results:
Key Highlights of Q4FY13
Revenues grew by 10.5% YoY from Rs. 3426 mn in Q4FY12 to Rs. 3781 mn in Q4FY13. The company
registered a growth 14.2% in its domestic business whereas Export business registered a meager
growth of 5.8%.
Domestic formulation business registered a growth of 12.5% from Rs. 1845 mn in Q4FY12 to Rs. 2075
mn in Q4FY13 whereas domestic APIs witnessed a YoY growth of 30.2%. APL’s specialty segment
(chronic segment) registered a healthy growth of 31% which was partially offset by a slow growth of
only 3% YoY in anti-infective, cold & cough segment (acute segment). The share of APL’s Speciality
segment to its total domestic formulations went up from 45% in Q4FY12 to 51% in Q4FY13.
Export formulations business registered a growth of 32.9% to Rs. 905 mn on the back of a 54.2%
growth witnessed in its international generics business. During the quarter, APL initiated supply of
Desvenlafaxine to Ranbaxy for sale in US market coupled with partial commencement of the
expanded formulation facility at Panelav. The company however witnessed a de-growth of 27.5% &
21.3% in its international branded business & export API business respectively.
Operating profit reported a growth of 59.5% from Rs. 411 mn in Q4FY12 to Rs. 656 mn in Q4FY13 on
the back of decline in material cost & other expenses (Forex loss of Rs. 18 mn in Q4FY12 vs Forex gain
of Rs. 32 mn in Q4FY13). The positive surprise came from margins side as EBITDA margins improved
to 17.3% as compared to 12.0% in Q4FY12 supported by better product mix.
A higher than expected expansion in EBIDTA margins coupled with a reduction in interest expenditure
on the back of debt reduction, aided the 115% YoY growth in net profit.
Key Highlights of FY13
Revenues grew by 3.7% to Rs. 15203 mn in FY13. The company registered a growth of 14.1% in its
domestic business whereas Export business registered a de-growth of 10.6%.
Domestic formulation business registered a growth of 13.2% from Rs. 7826 mn in FY12 to Rs. 8863 mn
in FY13 on the back of a healthy growth of ~27% in its specialty segment. Its domestic API business
registered a growth of 20.8% to record revenue of Rs. 1138 mn for FY13.
Export formulations business registered a de-growth of 10.6% to Rs. 5166 mn on the back of 2.5% degrowth
in its international generics business (phasing out of low margin products + capacity constraint
faced at Panelav during the year), 22.2% de-growth in its international branded business & 15.2% degrowth
its export API business (rationalizing it for high margin business + focus on captive use).
Operating profit reported a growth of 14.8% from Rs. 2194 mn in FY12 to Rs. 2520 mn in FY13 with
margins at 16.6% v/s 15.0% in FY12 bearing the fruits of the strategic decision taken by the company
to shift to high margin international generic business and increased contribution from specialty
segments in the domestic space.
Net Profit grew by 27% from Rs. 1301 mn to Rs. 1652 mn in FY13 mainly on the back of a substantial
dip in its interest expense (D:E now at 0.3 v/s 0.9 in FY12).
OUTLOOK & VALUATION
On the domestic formulations front, the company is already recording strong growth backed by
increasing contribution from its chronic portfolio. On the international generics front, with the transition
phase to high margin business over in Q4FY13 + Desvenlafaxine ramp up expected going forward, the
management is confident of recording 30‐35% CAGR over FY13-15E. With greater focus on chronic
segments & expected ramp-up from the regulated markets post commissioning of its expanded facility
coupled with expanding return ratios, robust cash flows (CFO - FY14E: Rs.2078 mn, FY15E: Rs.2457 mn),
reducing debt profile and expanding margins going forward, we believe APL is still trading significantly
cheaper vis-à-vis its peers and further re-rating is due on the counter (from 6x at the initiation time to
10x now). We have thereby rolled forward our TP to Rs.153 based on 12x FY15E EPS of Rs.12.8,
recommending a BUY on the stock & reiterate our view of it continuing to be a strong re-rating
candidate.
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