The Searle Company (SEARL): 3QFY18 EPS Rs3.4 +53% YoY (-32% QoQ); (In-line with expectations)
- SEARL announced consolidated earnings of Rs626mn (EPSRs3.4) up 53% YoY in 3QFY18, in-line with our expectations.
- Sales grew by a robust 24% YoY during the outgoing quarter, mainly on the back of higher volumes of Pharmaceutical segment that constitute over 85% of SEARL’s total sales where performance of SEARL’s biosciences venture remained strong. We believe that the Pharmaceutical segment of the company witnessed up to 20% growth in revenues while the consumer segment posted up to 30% growth during 3QFY18.
- The company’s gross margins contracted by 1.7ppts to ~50%, mainly on the back of higher input costs, we believe.
- Although distribution expenses were up 5% YoY in 3QFY18, as percentage of sales, they fell 4ppts to 22%, which supported the company’s bottom-line. We attribute this to lower advertisement and travel related expenses.
- We flag 1) lower than expected volumetric growth, 2) regulatory and legal issues restricting price increase, 3) delay in introducing new products and 4) higher than anticipated distribution expenses as key risks for SEARL.
The Searle Company Limited is a holding company, which is principally engaged in the manufacture of pharmaceutical products and other consumer products. In addition, the Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The Company operates through three segments: Pharma, Consumer and Investment property. The Company's geographical segments include Pakistan, South Asia, East Africa, South-East Asia and Middle East. The Company's portfolio includes three divisions: Pharma, Consumer Health and Nutrition. Its products include Selanz SR, Levoxin, Lomotil, Xaroban, Vitrum, Rhulef, Canderel, Peditral, Ezium, Hydryllin, Xadine, Zenbar, Extor, Adronil, Nuberol/Nuberol Forte and Byscard. The Company has pharmaceutical range across therapeutic areas, such as cardiovascular, respiratory care, gastroenterology, pain management, orthocare, neuropsychiatry, probiotics, antibiotics and nutritional care.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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