Alembic Pharmaceuticals Ltd (NSE:APPLLTD) (BSE:533573)

[SMR]

Alembic Pharmaceuticals Limited is an India-based pharmaceutical company. The Company develops, manufacture and market pharmaceutical products, pharmaceutical substances and Intermediates. The Company’s segments include Active Pharmaceutical Ingredients (API), Bulk Pharma Chemicals, Formulations, Herbal Nutraceuticals, Veterinary and Contract/Collaborated Research Service. API consists of independent manufacturing blocks for Macrolides, NSAIDs and other drugs. Formulations consists of more than 150 products in several forms belonging to diverse therapeutic segments from anti-infective, cough and cold products to cardiovascular and oral anti-diabetics. Herbal Nutraceuticals products include PROTINULES Powder, Sharkoferrol and Hermin Inj.

Official Website: www.alembic-india.com

[SMR]

Alembic Pharmaceuticals (Alembic Pharma) posted lower-than-expected results for 1QFY2016 on the OPM and net profit fronts, while sales too have come in marginally lower. The company posted sales of Rs583cr V/s an expected Rs601cr and V/s Rs492cr in 1QFY2015, a yoy growth of 18.4%. The growth was driven by domestic formulation (Rs291cr) and export formulation (Rs176cr) markets, which posted a yoy growth of 17.2% and 29.0%, respectively. On the operating front, the gross margins came in at 63.4% V/s 64.0% in 1QFY2015; the OPM dipped to 17.4% V/s an expected 19.8% and V/s 19.5% in 1QFY2015, a dip of 216bp yoy. Consequently, the PAT came in at Rs70cr V/s an expected Rs86cr and V/s Rs65cr in 1QFY2015, a growth of 8.1% yoy. We maintain our Neutral rating on the stock, considering the fuller valuations. Results lower than expectations: The company posted sales of Rs583cr V/s an expected Rs601cr and V/s Rs492cr in 1QFY2015, a yoy growth of 18.4%. The growth was driven by domestic formulation (Rs291cr) and export formulation (Rs176cr) markets, which posted a yoy growth of 17.2% and 29.0%, respectively. On the operating front, the gross margins came in at 63.4% V/s 64.0% in 1QFY2015; the OPM dipped to 17.4% V/s an expected 19.8% and V/s 19.5% in 1QFY2015, a dip of 216bp yoy. The gross margin dipped owing to a change in the sales mix. The OPM dip was sharper than the gross margin contraction, owing to higher R&D expenditure, which stood at 8.2% of sales in 1QFY2016 V/s 6.0% of sales in 1QFY2015. Consequently, the PAT came in at Rs70cr V/s an expected Rs86cr and V/s Rs65cr in 1QFY2015, a growth of 8.1% yoy. Outlook and valuation: Alembic Pharma’s growth and profitability profile has improved post the restructuring carried out by the Management. Over FY2015-17E, we expect the company to post a CAGR of 23.2% and 26.2% in sales and net profit, respectively. We recommend a Neutral rating on the stock.

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