MOSL: ALEMBIC PHARMACEUTICALS (Neutral)-US and ROW business drive earnings
Alembic Pharmaceuticals: US and ROW business drive earnings
(ALPM IN, Mkt Cap USD1.6b, CMP INR588, TP INR615, 5% Upside, Neutral)
- Strong beat on earnings for the quarter: Alembic's 3QFY19 revenue shot up by ~21% YoY to INR10.2b (in line with est.), primarily led by the US business. Gross margin (GM) expanded by 260bp YoY due to superior product mix. EBITDA margin expanded by ~150bp YoY to 23.8%, primarily due to higher GM and lower R&D expenses by ~70bp (as % of sales). This was partially off-set by higher employee expense by ~190bp (as % of sales). EBITDA grew by ~29% YoY to INR2.4b (v/s est. of INR2.2b), mainly led by healthy revenue growth and margin expansion. Interest expense stood at INR60m v/s INR8m YoY. PAT grew by ~30% YoY to INR1.7b (v/s est. of INR1.4b). For 9MFY19, sales/EBITDA/PAT stood at INR30.1b/INR7b/INR4.6b, up 32%/49%/44% YoY.
- Short in US market drives international formulation business: ALPM reported robust growth of ~44% YoY to INR4.5b in the International business (IB; 44% of sales). Growth in International business was led by both, the US business (~69% of IB sales), up ~30% YoY, and RoW segment (~31% of IB sales), up ~89% YoY. API business grew by ~14% YoY to INR2.1b. Domestic formulation (DF) business (37% of sales) grew ~5% YoY to INR3.7b, partly on high base of past year. On 9M basis, DF business grew 11.4% YoY.
- Con-call takeaways: (a) Short-term supply opportunities (other than Valsartan) maintained momentum in US sales and enhanced overall gross margins; (b) ALPM guided for 15-20 new product launches in the US market over the next four quarters; (c) Addition of customers in Europe, refilling backlog in Australia and new launches led to strong growth in the ROW market; and (d) ALPM would start filing injectables 4QFY20 onwards.
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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