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Timesfinancials.com alembic pharma q4fy'13 results analysis

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timesfinancials.com research reports about alembic pharma Q4 results, and timesfinancials.com complete analysis about alembic pharma.

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Timesfinancials.com alembic pharma q4fy'13 results analysis

  1. 1. TimesFinancials Ltd./Research 1 hr CMP: 121 (9th May 2013) Target: Rs.185. Alembic Pharmaceuticals Ltd BSE Code 533573 NSE Code APLLTD Mkt Cap (Rs.bn) 22.83 Beta 0.61 52 week High 126.8 52 week Low 47.5 Avg volume (BSE) 68912 Avg volume (NSE) 145611 Face Value (Rs) 2 Equity (Rs mn) 377 Sector:Pharmaceuticals Despite the seasonality factor, results for Q4FY’13 were above expectations. With the two key growth drivers – generic dosages exports and domestic formulation sales – doing well during the quarter, the topline growth and OPM has been impressive. Improvement in margins and cash flows leading to lower financial costs is a continuing story. The highlight of the quarter was the above industrial growth rate of the domestic dosages biz as the share of chronic medications continues to rise. More importantly, among the larger divisions, GI, CV and gynaecology have been growing at a faster pace than the industry. Exports of dosages to developed markets would receive a fillip in FY’14 once its aggressive Rs.1bn capex gets commissioned fully during H1FY’14. This would usher in a high growth phase during FY’14 and FY’15 as the pace of ANDA approvals too would gather pace. Good prospects ahead: The quarter was marked by a sharp growth in generic dosages exports due to partial commissioning of the capacity expansion. Branded dosages exports suffered a setback as a part of the capacity was used for preparing samples for filings across the U.S, E.U and Latin America. The domestic dosages business is set for a high teen growth as the share of the chronic segment (currently at 51% and growing at 31%) increases. The APIs biz is the bulwark of the company. With 59 DMF filings, it’s able to cash on one-time opportunities from innovator companies. Once the enhanced dosages capacity goes on stream, the management expects a 35-35% CAGR for exports over the succeeding three years. During FY’14 EBIDTA margin is expected to grow by 100-125bps. Investment potential – High growth, low risk Owing to the better business clarity, we are taking a two year call. Over the FY’13-15 period, we expect the company to post a sales CAGR of 18.1% (Rs.15.17bn to Rs.21.16bn). Due to margin improvement, we expect EBIDTA to post a CAGR of 29% (Rs.2.52bn to Rs.4.19bn). PAT is forecasted to post a 32.5% growth (Rs.1.65bn to Rs.2.9bn). Our 12-18 months target is Rs.185 (12XFY’15EPS; at the lower end of its peer- set), a 52.5% appreciation from the current level. Amish Mishwani Analyst: Healthcare Support@TimesFinancials.com www.TimesFinancials.com
  2. 2. TimesFinancials Ltd./Research Quarterly Results [Consolidated] Rs.Mn Q4FY12 Q4FY12 Growth Q3FY13 Growth Q2FY13 Growth Q1FY13 Growth FY13 Growth Net Sales 3766 3408 10.5% 3688 -3.3% 4058 2.2% 3661 6.6% 15173 3.8% Other opg income 15 16 -3.2% 5 -39.2% 11 1.9% 7 75.0% 37 -7.7% Operating Income 3781 3423 10.4% 3693 -3.4% 4069 2.2% 3668 6.7% 15210 3.7% COGS 1671 1530 9.2% 1506 -20.5% 1886 -2.7% 1744 1.6% 6807 -3.8% % Net Sales 44.4% 44.9% 40.8% 46.5% 47.6% 44.9% Excise duty 17 31 -30 12 11 10 Employees cost 508 431 17.8% 495 14.5% 486 20.3% 450 7.7% 1938 15.0% % Net Sales 13.5% 12.7% 13.4% 12.0% 12.3% 12.8% R&D Expenses 220 221 -0.6% 217 122.5% 160 9.8% 139 14.9% 737 25.7% % Net Sales 5.8% 6.5% 5.9% 4.0% 3.8% 4.9% Other expenditure 709 801 -11.4% 810 13.2% 878 1.7% 801 18.1% 3199 4.6% % Net Sales 18.8% 23.5% 22.0% 21.6% 21.9% 21.1% Operating Profit 656 408 60.7% 694 1.3% 647 7.0% 523 3.8% 2519 14.3% % Net Sales 17.3% 11.9% 18.8% 15.9% 14.2% 16.6% Other income 1 4 -82.5% 34 2 120.0% 2 175.0% 39 793.2% PBDIT 657 412 59.3% 728 6.1% 649 7.2% 525 4.1% 2559 15.9% Interest 18 54 -66.0% 39 -44.4% 31 -55.9% 57 -15.2% 146 -44.4% Depreciation 86 89 -3.1% 89 9.4% 88 4.4% 87 5.7% 350 3.9% PBT 552 269 105.0% 601 12.2% 530 17.6% 381 7.4% 2063 28.2% % Net Sales 14.6% 7.9% 16.2% 13.0% 10.3% 13.6% Current tax 102 53 93.3% 121 25.6% 106 15.9% 73 1.1% 401 28.5% Effective tax rate 18.4% 19.5% 20.2% 19.9% 19.2% 19.5% Deferred tax 14 14 -0.7% -3 -9.1% -1 -97.1% -1 10 PAT 437 203 115.1% 483 9.2% 425 11.7% 308 11.8% 1652 27.0% % Net Sales 11.6% 6.0% 13.1% 10.5% 8.4% 10.9% Equity 377 377 377 377 377 377 EPS 9.3 4.3 10.2 9.0 6.5 8.8 v Owing to the partial commissioning of the enhanced dosages capacity, YoY growth for Q4 at 10.5% was the best during the fiscal, notwithstanding the seasonality factor. v Due to a 11.4% dip in other expenses at Rs.709mn, operating margin for the quarter was a respectable 17.3%. For the fiscal too, at 16.6%, it’s grown by 160bps. v The pre-tax profit of Rs.552mn for the quarter means that for the past three quarters, it has been in the Rs.530-600mn range. A continuous decline in net interest expenses had a large role to play in this improvement. v Relatively lower tax rate of 18.4% for the quarter has led to a PAT of Rs.437mn. Thus, for the past three quarters, it has been in the Rs.425-483mn range.
  3. 3. TimesFinancials Ltd./Research 3 Highlights: Cumulative ANDA filings stand at 57 with approvals at 24. Cumulative DMF filings stand at 60. During the quarter, it had two ANDA filings and three approvals. DMF filings during the quarter too were two. The enhanced dosages capacity was partially commissioned during the quarter. Its expected to run at full capacity of 5bn (from the current 2.6bn) dosages by the first half of FY’14. Of the Rs.1.02bn spent on capex in the current fiscal, Rs.870mn was for the dosages expansion. NDA for Desvenlafaxine HCl XR tabs was approved during the quarter. This is a bioequivalent of Pfizer’s Pristiq (Sales of $573mn), though not AB rated. APL’s first 505 B2 application, it has been partnered and launched by Ranbaxy. During the year, three dossiers were filed with ANVISA and two were filed in the EU. DER has improved significantly from 0.9 in March 2012 to 0.33. Sales break-up: Rs.Mn Q4FY13 Q4FY12 Growth Q3FY13 Growth Q2FY13 Growth Q1FY13 Growth FY13 Growth Formulations 2980 2526 18.0% 3037 11.3% 3136 1.0% 2508 2.4% 11662 7.9% Domestic 2075 1845 12.5% 2276 14.5% 2539 11.9% 1972 14.4% 8863 13.2% Export - ROW 129 177 -27.5% 150 -3.7% 87 -27.9% 76 -33.3% 441 -22.2% Export - Reg 777 504 54.2% 611 4.4% 510 -28.5% 461 -24.7% 2358 -2.5% Bulk 787 873 -9.9% 670 -38.3% 910 10.3% 1140 19.3% 3506 -6.1% Domestic 250 192 30.3% 250 33.5% 334 51.5% 305 -12.3% 1138 20.8% Export - ROW 537 681 -21.3% 420 -53.3% 576 -4.7% 835 37.5% 2367 -15.2% Total 3767 3399 10.8% 3707 -2.8% 4045 3.0% 3648 7.2% 15167 4.3% In the domestic market, it maintained its market share at 1.79% by virtue of the 13.2% growth during the year. The chronic and acute segments posted a 27% and 3% growth respectively vis a vis 11% and 3% for the industry. In recent months, industrial growth rate has declined from 15-16% to 11%. During the year, it launched a dermatology division, with eight products. This addition to the basket of specialty products is expected to propel future growth. Exports to the regulated markets spurted by 54% to Rs.777mn during Q4. However, for the fiscal, sales at Rs.2.36bn was down by 2.5%. During the quarter, desvenlafaxine base XR tablets was launched in the U.S. Recent generic approvals Product Dosage (mg) Approval date Branded sales ($Mn) Opportunity Modafinil 100, 200 Oct’12 1200 Limited competition Valsartan+HCT Multiple Mar’13 1600 High competition Irbesaratan Multiple Oct’12 2100 High competition Irbesaratan+HCT Multiple Oct’12 351 High competition
  4. 4. TimesFinancials Ltd./Research 4 Domestic biz on the growth path: v During Q4FY’13, while the share of anti infectives in domestic sales has declined by 500bps to 36%, that of specialty therapies has risen by a whopping 600bps to 51%. Comparative growth rate Segment FY’13 FY’12 MS Inds Alembic Inds Alembic Anti Infective 4.4% 3.0% 2.0% 11.0% 8.0% Gastro 2.6% 11.0% 25.0% 11.0% 28.0% Cough and cold 5.1% 8.0% 8.0% 9.0% 6.0% Cardio 1.4% 12.0% 42.0% 16.0% 22.0% Gynaecology 2.3% 5.0% 30.0% 11.0% 6.0% Ortho 1.2% 7.0% 6.0% 11.0% 10.0% Diabetology 1.3% 23.0% 40.0% 25.0% 26.0% Nephro/Uro 2.2% 15.0% 63.0% 17.0% 25.0% Opthal 1.6% 7.0% 48.0% 15.0% 13.0% v Among the top five therapies, the anti infective and gynaecology segments have been witness to a sizable degrowth. While the company has fared badly in the former, in the gynaecology segment, it has posted a 30% growth vis a vis a 5% growth for the segment. It has managed to post a very good growth rate in the GI and CV segments but the cough and cold segment continues to be a drag with high single digit growth rates. v Among the emerging segments for the company, while the orthopaedics segment has posted a 400bps degrowth, the diabetology and urology/nephrology segments have continued to outpace the industry with the company outpacing the segments by a huge margin. v In a nutshell, as the share of anti infectives and cough and cold in overall domestic sales declines, the overall growth would outpace the industry growth by a wider margin. v A dermatology division with eight products was launched during the year. v Future investments are earmarked for the faster growing segments. Con-call highlights: v During the quarter, it posted a forex gain of Rs.32mn. Gains for the fiscal was Rs.45mn. v Milestone payment for FY’13 was around Rs.250mn. Since a part of this was on account of desvenlafaxine (received in Q3FY’13), the management has guided for a lower figure in FY’14. v Of the regulated market sales, the N.American market accounts for 60% of revenues. US generic sales would drive sales over the next two years. The management expects exports to regulated markets to grow by 30-35% over the next 2-3 years. Apart from the spurt in
  5. 5. TimesFinancials Ltd./Research 5 US sales, the outlook for U.K and German too are good. The management expects to launch 8-10 products every year over the next three years in the U.S market. During the current fiscal, it launched seven products. v Going forward, the emphasis would be on niche products and NDA filings. Apart from oral solids, the current focus is on Para-IV challenges to be followed by filings in niche and high technology areas like inhalations and dermatology. For FY’14, it targets 10-12 ANDA filings, 3-4 of which would be FtoFs. During FY’13, it’d three FtoFs. A 505 b-2 application is expected in the case of Warfarin over the next 12 months based on the Accubreak technology. v R&D expenses, currently around 5% of sales is expected to gradually inch upto 6-7% of sales. v It has great expectations from Modafinil, which was launched recently owing to the limited competition. Valsartan too, which is slated for launch in the next few months holds good promise due to the large opportunity. The biggest growth driver for the current fiscal, DesVenlafaxine has seen the shipment of a portion of the launch quantity during Q4FY’13. It expects sales to kick in from Q1FY’14 with a gradual gain in market share. v In the case of EU and Brazil, it expects traction in FY’15 when three products are expected to be launched in both the markets, either on its own or through partners. It already has three launches in Australia. v Apropos the domestic dosages, the growth in the GI segment was led by sartans, while in the case of gynecology, Ovigyn-D has fared very well. That apart, the ophthalmology division has attained critical mass and is expected to start generating profits. New product launches (25 during the fiscal) contributed 3.2% to sales. v The emphasis is on enhancing productivity. During the past twelve months, it has recruited only 100 MRs for the new derma division. The current MR strength is around 3,000 with the supervisory strength being another 600. For FY’14, domestic dosages is expected to grow at 15%. v The API biz has struggled owing to the high base effect and the greater emphasis on captive consumption. It expects this division to post a 10-15% growth. v Debt decreased sizably during FY’13 as it managed to close out inter group transactions. It expects to become debt free in the current fiscal. The capex for FY’14 is estimated at Rs.600mn. In order o prepare for the future growth, it has plans of setting up a new unit from FY’15 at an outlay of Rs.1.5-2bn for international generics. v It expects a 100-125 expansion in operating margins year on year.
  6. 6. TimesFinancials Ltd./Research 6 Balance sheet (Consolidated) Rs.Mn FY13 FY12 Equity 377 377 Reserves 4652 3573 Networth 5029 3950 Secured loans 833 1071 Unsecured loans 701 1384 Total debt 1534 2456 Total capital employed 6563 6406 FA 3765 3261 Investments 33 33 Inventories 2668 2587 SDs 2329 1993 Cash and bank 161 471 Loans and advances 1522 2174 Total Cas 6680 7226 CLs 3092 3607 Prov 684 411 Total CLs 3776 4018 NWC 2905 3208 DTA -139 -95 Total assets 6564 6406 Gearing 0.3 0.6 Current ratio 1.8 1.8 Asset turnover 4.0 4.5 ROCE 33.1% 29.2% RONW 32.9% 32.9% Inventories 119 111 SDs 56 50 Loans and advances 64 91 Mcap 22999 EV 24372 EV/EBIDTA 9.6 Valuation: Owing to the better business clarity, we are taking a two year call. Over the FY’13-15 period, we expect the company to post a sales CAGR of 18.1% (Rs.15.17bn to Rs.21.16bn). Due to margin improvement, we expect EBIDTA to post a CAGR of 29% (Rs.2.52bn to Rs.4.19bn). PAT is forecasted to post a 32.5% growth (Rs.1.65bn to Rs.2.9bn). Our 12-18 months target is Rs.185 (12XFY’15EPS; at the lower end of its peer-set), a 52.5% appreciation from the current level. Coverage History with adjusted price Date of coverage CMP Recommendation Price target 3rd October 2011 41.3 BUY 65.0 19th October 2011 45.2 BUY 65.0 2nd February 2012 41.9 BUY 65.0 26th April 2012 53.3 BUY 85.0 9th August 2012 58.8 BUY 100.0 19th October 2012 69.5 BUY 100.0 22nd January 2013 69.4 BUY 100.0 9th May 2013 121.0 BUY 185.0
  7. 7. TimesFinancials Ltd./Research 7 Domestic formulation sales (ORG IMS) Therapy Brand FY’11 (9M) FY’12 FY'13 Growth Anti Infectives Azithral 728 1189 1332 12.0% Azithral XL 54 78 43.0% Althrocin 619 919 928 1.0% Roxid 443 577 543 -6.0% Zofix 71 191 187 -2.0% Megaclav 48 135 167 24.0% Fort.Proc.Peni 83 80 -3.0% Furobid 41 58 41.0% Cepime-O 56 51 -9.0% Anti diabetic Glisen 51 Glisen-MF 76 118 55.0% Glisen-PM 42 53 25.0% Glimser 28 Glimser-P 37 51 36.0% Vogo 19 46 70 51.0% GLZ 11 Popfix 9 Cardio Revas 82 46 52 13.0% Revas-H 55 60 9.0% Atecard 56 59 57 -4.0% Tetan 55 64 78 22.0% Tetan-H 50 71 42.0% Tetan-AM 39 58 49.0% Tellzy 45 52 87 68.0% Tellzy-H 41 71 72.0% Tellzy-AM 38 67 74.0% Rosave 21 44 65 48.0% Gastro Ulgel 200 252 295 17.0% Ulgel-A 103 138 34.0% Rekool 198 132 159 20.0% Rekool-D 180 225 25.0% Rekool-L 76 136 78.0% Livfit 88 176 168 -5.0% Levogastrol 33 58 66 14.0% Urdiogem 19 Pentab-D 85 107 26.0% Gynaec Gestofit 62 131 267 103.0% Protinules 48 101 123 22.0% Ricahr XT 46 82 73 -11.0% Cycloset 45 80 83 4.0% Ovigyn 37 Ovigyn-D 47 98 110.0% Ortho Osteofit 70 Magadol 50 86 91 6.0% Nimegesic 46 Etrik 34 54 65 19.0% Axogard 17
  8. 8. TimesFinancials Ltd./Research 8 Therapy Brand FY’11 (9M) FY’12 FY'13 Growth Respiratory Wikoryl 253 517 522 1.0% Zeet 235 256 274 7.0% Bro-Zeet 135 146 8.0% Glycodin 64 112 105 -6.0% Laveta 38 Laveta-M 44 62 39.0% Ephedrex 30 Vitamins and tonics Sharkoferrol 104 219 221 1.0% Hermin 39 83 100 20.0% Cadx 10 Diax 8 Vitaresp 3 Lactonic 67 96 43.0% Al5Zyme 39 55 41.0% Nephrology Geriflo 49 55 60 9.0% Geriflo-D 59 77 31.0% Darif 6 Fulflo 3 Grand Total 4653 9706 10968 13.0%

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