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Highlights from the Quarter (Q1 FY23)

Consolidated sales for the quarter were at Rs.2,777.3 cr recording degrowth of about 5.7% yoy. Excluding the global sales of COVID-related products in the Q1FY22, the yoy growth in the base business was at 10.4%. The Company launched seven new products during the quarter, including Indamet (the first company in India to launch) for the treatment of uncontrolled asthma. It expects a mid-teens growth for FY23, with good launches in respiratory and diabetes going forward. The company took provision to the tune of Rs.41 cr on account of Covidrelated inventory and has an additional Rs.40-50 cr of the products in the trade channel. The company now has 9 brands in the top IPM 300 brands in the country, up from six brands last year. US sales were down 15% yoy, with price erosion on the portfolio. The company plans to file 12-15 ANDAs in FY23 and expects 2QFY23 to be better than the current quarter. Monroe facility had received Form 483 with 17 observations from USFDA and the company has submitted its reply to USFDA. It is hopeful of supplying the products from this facility from Q4FY23 onwards. Europe business saw a growth of 7.9% yoy, with the easing of Covid restrictions and expects CAGR of 15-20% with Ryaltris becoming the big contributor. Following is the guidance given by the company for FY23:

1) Revenue growth of 6% to 8% during the year.

2) EBITDA margin to sustain at FY22 levels (~19%).

3) The company expects to close one to two out-licensing agreements in the innovation pipeline

OUTLOOK AND VALUATION

We expect strong positioning in the domestic market, the launch of Ryaltris drug in the US market and opening up in Europe tailwinds to play out. India business is expected to return to strong growth on account of first to launch drugs in diabetes and respiratory space. EBITDA margins are likely to remain steady, as rising commodity prices are expected to be offset by new launches in US and India. We expect the company to deliver an EPS of Rs.46.1 in FY24; assigning a target multiple of 13x, we have a BUY rating for a target price of Rs.622 (+~61%) over an investment horizon of 18-24 months.

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