Published on 22/07/2021 10:45:33 AM | Source: Yes Securities

Sell Syngene International Ltd For Target Rs. 515 - Yes Securities

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Our view

After an outsized Remdesivir sales boost in Q1 and no change to 15% revenue growth guidance in FY22, rest of the fiscal translates into just 8‐9% yoy growth. Also 20% capacity utilization of Mangalore facility in 2 years results in 2% annual revenue boost in FY22/23. Hence, we view absolute contribution of Mangalore API facility as insignificant given the base in FY23. Another potential catalyst in the form of API supply for Alberio is also baked in the guidance and we believe any optimism on API supplies should be tempered given the limited volume opportunity due to small patient population. We assign low probability on any revenue surprise for rest of the year which leaves little room for further rerating. Introduce FY24 forecast and bake in 23% growth over FY23 (vs 14% cagr over FY20‐23) as FDA/EMA approvals would drive Mangalore utilization. Roll over target 27x PE to FY24 but retain SELL with revised TP Rs515 (Rs400 earlier).  


Result Highlights

* Revenues ahead of our estimate as topline got Remdesivir boost on what was an expected surge on low base of last year; ex‐Remdesivir and low base, reckon 15% growth in Q1

* Gross margin declined as Remdesivir sales came with much higher ‐ 60% COGS compared to usual run rate of 25%  

* Growth across all 4 segments; dedicated centre growth got a boost from expansion of BMS R&D centre  

* Mangalore API facility expected to undergo an FDA inspection within next 24 months; till then, looking at 20% utilization  

* Guided to 15‐20% rise in biologics capex + strong third party demand for biologics manufacturing capacity globally. 


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