Poly Medicure Ltd - Quality Deserves Premium; Result Update Q2FY15 :: Edelweiss, PDF link

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Poly Medicure Ltd. (POLYMED) Q2FY15 EBITDA and PAT surpassed our estimates by 10% and 30%, respectively. Key positives were: (1) strong growth in both exports and domestic markets and (2) EBITDA growth of 13% YoY and 23% QoQ at INR 24 cr and EBITDA margins of 24.8% vs estimate of 23% (26.3% in Q2FY14 and 23.3% in Q1FY15) due to lower raw material costs (as global PVC prices cooled off during the quarter after a spike in Q1FY15). We continue to believe that the long-term outlook for POLYMED remains pretty buoyant on the back of multiple factors like ageing population, change in disease profile, rise in income levels and socio-economic inclusion of rural and the deprived. We expect POLYMED to sustain its historical growth trajectory with PAT CAGR of ~22% and RoCE of 30% plus over FY14-16E.

Sales growth in line, new Jaipur facility to drive growth

POLYMED reported in line Q2FY15 sales growth of 20% YoY and 16% QoQ, led by strong growth in both exports (up 18% YoY) and domestic market. The company expanded its capacity with better product mix at Jaipur, which is expected to be commissioned by Q1FY16, as regulatory clearances are still pending. The new Jaipur facility has capacity of 100 mn pieces/year of various disposable devices and will drive incremental growth in FY16.

EBIDTA margins surpass estimate due to lower raw material prices

EBITDA grew by 13% YoY and 23% QoQ to INR 24 cr and EBITDA margins came in at 24.8% vs estimate of 23% (26.3% in Q2FY14 and 23.3% in Q1FY15) due to lower raw material costs (as global PVC prices cooled off during the quarter after a spike in Q1FY15). The company is continuously improving efficiency in its older plants at Faridabad and Haridwar through automation which we believe could lead to margin improvement going forward. Also, contained forex losses will lead to margin improvement over the next couple of years. For the full year FY15, we expect EBITDA margins to remain steady at 23%. PAT for the quarter was ahead of our estimates at INR 13 cr, up 19% YoY and 36% QoQ. 

Favorable ruling on US JV termination entails INR 21 Cr inflows

The company has received a settlement amount of INR 21.50 cr on JV termination clause with a US company during the quarter. POLYMED had entered into a JV with a US company to manufacture medical disposables, but the JV got terminated as the US company was acquired by other company. POLYMED will use the proceeds received from US JV for future capex.

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https://www.edelweiss.in/research/Poly-Medicure-Ltd--Quality-Deserves-Premium;-Result-Update-Q2FY15/10005162.html