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Alembic Pharmaceuticals Ltd.(APL) | Q3FY13 Result Update




IndiaNivesh Securities Pvt Ltd


22 Jan 2013





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Alembic Pharmaceuticals Ltd.(APL) | Q3FY13 Result Update Revenue missed slightly, however operating performance was ahead of expectations linked with milestone payment Revenue marginally below expectations on account of lower sale from API business: APL’s Q3FY13 revenue was slightly below our estimates & de grew 3.4% y-o-y (9.2% q-o-q) to Rs 3.69 billion (V/s INSPL estimates = Rs 3.83 billion) in Q3FY13 on the back of 14.5% y-o-y growth from domestic formulations & 4% y-o-y growth from international generics partially offset by 38% decline in API business. Operating margins were ahead of expectations on account of undisclosed milestone payment: APL’s EBITDA grew 1.3% y-o-y & 7.3% q-o-q to Rs 694 million in Q3FY13 V/s INSPL est = Rs 482 million mainly due to un-disclosed milestone payments. Despite 36% q-o-q (123% y-o-y) jump in R&D expenses & increase in other operating expenses, EBITDA margins expanded 86 bps y-o-y (287 bps q-o-q) to 18.8% level (INSPL estimated ~12.6%) mainly due to milestone payment. According to management, adjusting for milestone payments, material cost was ~45% of revenue during the quarter. Hence, adjusting for that, EBITDA margins would be at 14.5% level during the quarter. Valuation: At CMP of Rs 71, the stock is trading at P/E multiple of 7.1x of FY14E & 5.5x of FY15E earnings estimates. We have recommend buy on the stock at prevailing price of Rs 49 in our “initiating coverage report released on 7th June 2012” with the target price of Rs 79, which has been already achieved. Given the recent guidance on margins front, revenue from regulated markets & new pricing policy impact, we have tweaked our numbers slightly, though overall revenue & earnings growth remains almost same during FY12-15E. Currently, by rolling over P/E multiple of 8x to FY15E, we maintain BUY on the stock with the target price of Rs 99.

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