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Key earnings drivers intact

Our view

A strong revenue quarter with some one-off strength in Africa branded business though higher input costs made dent on the flow through in to EBIDTA. Expect US business to clock modest growth in FY22 albeit momentum can change led by a potential Chantix approval. We see a firm margin trajectory over next three years driven by continued India rebound in FY22 and improved MR rationalization while a tapering of capex would lead to solid cash generation over FY23/24. Domestic business to benefit from over 20 launches last year which have not been fully monetized and promoted, A smaller based in US means AJP is lesser affected by ongoing price erosion and mostly dependent on fresh approvals. Reckon margin will inch up to 31-32% especially if volumes ramp after Guwahati capex; retain BUY based on unchanged 26x FY24 EPS with TP Rs2,620.

Result Highlights

* Revenue jumped on low base of last year & up 24% YoY, ahead of our estimate of +6% yoy

* Branded business across Asia and Africa by 6-38% YoY while new launches in US aided 26% YoY. Domestic business jumped 23% YoY on back of robust performance in cardio and Ophthalmology

* Gross margin lower by 455bps YoY to 73.8% probably due to price erosion and higher RM costs. Margin flat QoQ on slower rise in opex, offsetting input costs increase and down YoY on low cost base of last year

* Strong revenue traction led to 15% rise in PAT

Valuations

Reckon margin will inch up to 31-32% especially if volumes ramp after Guwahati capex; retain BUY based on unchanged 26x FY24 EPS with TP Rs2,620.

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