Result Highlights

* Strong performance across the board; India, US clocked 20% growth while India revenue rise of 23% came in as a surprise  

* Africa institutional business remains volatile; company guided for Rs2.7bn in FY22 sales  

* Gross margin expanded by ~400bps yoy as Q4 last year included product recall cost (mostly Ranitidine); other expenses decreased by ~18%, partly due to lower R&D. Other expenses ex‐R&D declined due to ongoing second wave that started in March. Company expects gross margin to sustain around 75% with a range of +/‐ 100bps in FY22

* R&D expenses  stood at Rs390mn (5% of sales); to rise by 100bps in FY22 as FY21 was a suppressed year for research expenses  

* PAT grew by 21% yoy driven by better than expected topline and margin performance

Our view:

FY22 would see rebound in domestic growth on low base (+6%) of FY21 while US would sustain 18% growth; expect some slowdown in FY23 on back of lower filings in FY21. Branded generics to maintain growth in the range of 11‐12% over FY21‐ 23.

Margin to decline in FY22 as one‐offs in the form of lack of costs in FY21 would reverse, coupled with rise in R&D to 5.8% of sales; this would result in ~450bps margin correction on FY21 base, even after assuming ~13% topline growth. Albeit, this would be a temporary phase with margin likely to inch upwards next fiscal. We raise FY22/23 revenues offset by cut in EBIDTA margin on lower gross margin leaving EPS estimates largely unchanged. BUY stays based on 25x FY23 EPS.

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