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Result Highlights

* FY22 guidance – Mid teens growth in revenues. EBIDTA margin expected to stay flat at around 30%. Investment‐led growth to result in single digit profit growth. Capex of Rs7.5‐9bn.  

* Single digit growth in FY22 PAT (excluding exceptional items) leads to 12% cut in ours and even more so for consensus FY22 estimates

* Healthy end to FY21 with underlying revenue +13%, excluding export incentives. Growth driven by discovery, manufacturing and dedicated centres.   

* Company to incur Rs2bn capex on a viral vector facility in the current fiscal; project would be completed in 2 years  

* Phase 3 of the Hyderabad facility would be completed by year‐end with addition of 300 scientists, taking total strength to 600 at the facility

Our view:

We cut FY22 estimates by 12% to account for the slower PAT growth guidance. Also, marginally trim FY23 estimates as we factor in revenue start from Mangalore API facility and BMS collaboration which, coupled with margin improvement, would offset the lower base effect of FY22. Our rating and TP remain unchanged as most of the impact of tepid guidance would be felt in current fiscal while FY23 would see a rebound in revenues and ~250bps rise in margin yoy, driven by operating leverage and completion of investments.

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