Buy Sequent Scientific Ltd For Target Rs.140 - Yes Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Bouncing along the troughs
Result Synopsis
Sequent reported yet another disappointing quarter with revenue decline on YoY and QoQ basis. In cc terms, revenues grew 3% as API business was subdued due to slower demand and delays in conclusion of few contracts; formulations business grew 15% in constant currency driven by strong performance in emerging markets and India. Albeit, Turkey continues to be a pain point upon translation while Europe presented additional risk due to high energy costs (in lieu of plant in Germany). Gross margin was lower QoQ leading to largely unchanged adjusted margin of close to 6% (adjusted for 100bps gross margin impact), ESOP cost and other one-off costs.
Management guided to marginally better H2 for API business while next year would be bolstered by Zoetis supply agreement leading to faster growth on a weak base. We have cut European revenues given the challenges that have surfaced in 2Q along with moderation on API growth in FY23 vs earlier envisaged. However, we continue to factor in gross margin rebound next year on back on a weak base + Zoetis deal adding US$5- 6mn to API revenues. Hence a combination of improvement in gross margin and faster revenue growth would lead to margin touching double digit and within management expectation of mid-teens over next 2 years. Given the 20% cut to EPS in FY24 and another 1-2% dilution due to Tineta Pharma buyout, we lower TP to Rs140 (earlier Rs180) based on unchanged 35x FY24 EPS.
Result Highlights
* API revenues up QoQ but impacted by erratic demand and price pressures
* Formulations growth of 15% YoY in cc upended by currency upon translation from Turkey and Europe
* Macro challenges in certain markets especially in Europe and Turkey including currency and end user demand problem (in Europe); effort is to manage costs to tide over revenue impact
* Gross margin down QoQ by 100bps while EBIDTA margin broadly stable QoQ at around 6% adjusted for gross margin impact, ESOP cost and other one-offs
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632
Above views are of the author and not of the website kindly read disclaimer
