MOSL: ALEMBIC PHARMACEUTICALS (Neutral)-Strong growth in US business-higher tax hurts
Alembic Pharmaceuticals: Strong growth in US business; higher tax hurts profitability
(ALPM IN, Mkt Cap USD1.6b, CMP INR479, TP INR500, 4% Upside, Neutral)
- Strong 4Q results: Alembic's (ALPM) 4QFY18 revenue increased ~16% YoY to INR8.5b (~4% beat). EBITDA grew significantly by ~30% YoY to INR1.7b (but missed our estimate of INR1.8b), with the margin expanding to 20.3% from 18.1% in 4QFY17 and 22.3% in 3QFY18. Gross margin contracted ~400bp YoY/QoQ, mainly due to pricing pressure in the US business, albeit the company witnessed an increase in volumes. Despite strong EBITDA growth, PAT grew by only 0.5% YoY to INR938m due to a higher tax rate of 27.5% (v/s 14.7% in 4QFY17). For FY18, sales, EBITDA and PAT stood at INR31.3b (-0.1%), INR6.4b (+5%) and INR4.1b (+2.5%), respectively.
- Domestic business hurt by weakness in Specialty segment: Domestic business grew 6.3% YoY, driven by strong growth in Acute segment (+19% YoY), partially offset by weakness in Specialty (-2% YoY). International business grew robustly by ~29% YoY, led by significant growth in US business (+45% YoY, +22% QoQ) on the back of increased market share and volumes. Non-US business remained flat during the quarter.
- Concall takeaways: (a) R&D expense to increase to INR4.5-5b in FY19 from ~INR4b in FY18; (b) Onco oral solids and derma facility is ready, and onco injectable and general injectable facility will be ready in FY19. New oral solid dosage facility is expected to be completed by 2HFY19. (c) Company has responded to queries related to Panelva facility, and after obtaining EIR, it expects to launch 10-15 products. (d) Company has guided for INR6b capex for FY19 for capacity expansion.
Alembic Pharmaceuticals Limited is a pharmaceutical company. The Company is engaged developing formulations and active pharmaceutical ingredients (API). The Company focuses on anti-infective, analgesic and, cough and cold therapies. It also focuses on therapies, such as cardiology, diabetes, gynecology, gastrointestinal, orthopedic, dermatology and ophthalmology. Its APIs include independent manufacturing blocks for Macrolides, non-steroidal anti-inflammatory drugs (NSAIDs) and other drugs. The Company offers international and domestic formulations. Under domestic formulation, it offers Branded Formulations and Generic formulations. Its domestic formulation include Roxid, Zofix, Althrocin, Tellzy AH, Revas H, Lactonic, Folinal, Gestofit, Glisen 1/2, Glimser 1/2, Veldrop, Azithral, Brinzemic and Neolap. Its generic formulations include Cetral, Ephedrex CD, Sicor, Worid, Alcephin, Alcizon, Baciclox, Comeba, Furobid, O Win Suspension, O win T, Silomag Gel, Pentab, Aginal AT and Pyremol.
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