Alembic Pharmaceuticals Ltd. |Q2FY15 Result Update | In-Line results; Outlook remains promising; however, maintain HOLD on valuation :: IndiaNivesh

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In-Line results; Outlook remains promising; however, maintain
HOLD on valuation
Alembic Pharma (ALPM IN) adjusted PAT came in at Rs773mn, in line with our
estimates of Rs760mn for the quarter. Though the sales, at Rs5.5bn, grew lower
than our estimates, lower depreciation and tax led PAT to come in line with our
estimates. We maintain our estimates for FY15 and FY16. Accordingly, we maintain
our price target of Rs412 with HOLD rating on the stock

Domestic formulation (DF) and lower tax drives earnings for the quarter: Adjusted
PAT grew by 19.5% y-y to Rs773mn, led by above-industry growth rate in domestic
formulation. The increased proportion of relatively higher margin formulation (both
domestic as well as exports) has led to EBITDA margin to sustain at elevated levels
of ~20%. The higher y-y growth in adjusted PAT was also supported by lower tax
rate. Tax rate for the quarter was 19.3% against 22.2% y-y and 23.7% q-q.
Management has guided for tax rate of 21% for FY15
Y-Y growth rate in international generics takes a pause after five quarters of strong
growth rate: International generics grew at moderate rate of 13% y-y after strong
growth of 25-80% for past five quarters. US generics sales came in at US$20mn
against US$18mn y-y. The lower y-y growth has been due to high base of past year,
giving up of low margin contract manufacturing business by the company as well as
lower traction in some of newly launched products. ALPM filed one ANDA in 2Q
FY15 and cumulative filing stands at 65 till the end of 2Q FY15. ALPM has 30 ANDA
pending for approvals. During the quarter, two DMFs were filed, taking the
cumulative DMF filing to 68. Management has maintained the guidance of 7-9
product launches for FY15.
New product launches led to 14% y-y growth in DF for the quarter: ALPM’s DF
(branded) grew at 14% y-y to Rs2.8bn, led by ~18% y-y growth in specialty as well as
acute segment. Therapeutic category-wise, Cold&Cough, Anti-Diabetic, Cardiology
and Gynaecology grew by more than ALPM’s DF growth rate. ALPM launched 14
products in domestic market. The new product launches was spread across
therapeutic category. We expect the growth rate to improve in coming quarters on
the back of new product launches and improvement in productivity of MRs.
Valuation
We maintain our estimates for FY15E and FY16E at Rs16.6 and Rs20.3, respectively.
We continue to value ALPM at 20x FY16E earnings to arrive at price target of Rs412.
We remain positive on business model of ALPM, with growth drivers in both,
domestic branded formulation as well as international generics remains intact and
company in position to take the advantage of the same. However, with the limited
upside from current levels, we maintain HOLD rating on the stock.

LINK
http://www.indianivesh.in/Admin/Upload/635494794443135000_Alembic%20Pharma_Q2FY15_Result%20Update.pdf