Solid delivery continues; Top pick BUY TP Rs1,180
Q2 call takeaways
* Guidance: EPS of Rs60 for FY21 (Rs33 in H1 FY21) and Rs50/share in FY22; additional Rs4.5bn costs from new facilities in FY22. Not much in FY21 as plants to be audited by FDA.
* Domestic: Azithral oral gave a solid boost in Q2 and will continue in Q3 and Q4. Gastro and Gyanec rebounded after weakness
* Cardio, diabetes also doing well than market; only area of concern is cough and cold where IPM market still on decline and perf in line with market
* Launched 3 products in Q2 and 15 in H2 to end total of 15‐20 in FY21 followed by launches from new facilities; sartans has been stable but new launches have had an offset
* General injectables pipeline is most exciting while Jarod OSD has a very large filing; onco opportunity is some time away Filings from F3 (onco facility) but not sure when FDA will come for physical inspection
* Rizen: Would file for CLL indication in May 2021.
Our view: A solid performance and an unprecedented EPS guidance indicates a high confidence on visibility of sustaining sartans in FY21. We bump up FY21 EPS (on back of sartans present in H2 vs earlier assumption of gradual ebb) as would the street though FY22 estimates see only a marginally uptick to Rs48 (from Rs47 earlier). Alembic stays our top BUY with unchanged TP Rs1,180. Upside risks exist to FY22 estimates if sartans continue to surprise next fiscal.
Q2 FY21 results ‐ India sales rebound; US stays firm
* India sales surprise with 6% yoy growth after a tough Q1 which would have aided gross margin at 78% vs expected ~74%
* US sales at US$83mn continue to stay firm as sartans tailwind persists. Other expense jump 33% qoq with R&D at Rs1.8bn vs Rs1.4bn in Q1 FY21
* ROW outperforms expectation with 85% surge as base quarter was beset by serialization issues in Europe
* Solid EBIDTA performance with margins sustaining at 30%, flat qoq vs our estimated of 26.5%; PAT handily beat estimates.
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