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Indoco Remedies - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-08-12 09:13:26

Q1FY21 revenues grew 9.2% YoY to Rs. 276 crore with export formulations growing ~60% YoY to Rs. 95 crore partly offset by 9% YoY fall in domestic formulations to Rs. 147 crore. EBITDA margins expanded 877 bps YoY to 17.6% on account of better gross margin performance and lower travel & promotional expenses. Subsequent EBITDA grew 117.1% YoY to Rs. 48.7 crore. PAT for the quarter came in at Rs. 17 crore vs. Rs. 1.8 crore in Q1FY20.

Valuation & Outlook

Q1 growth was led by strong growth in export markets (albeit on lower base), strong gross margins and lower travel & promotional spends. The management has guided for significant export growth and margin improvement for FY21. After going through rough patches in FY18-19, where the company faced headwinds on the domestic front (structural issues) and exports front (regulatory setbacks), the situation is returning to normalcy. While FY21 growth in the domestic market is likely to be subdued on account of Covid-19, with easing logistical challenges and removal of ban on Paracetamol, good traction on the exports front is expected to continue with regulatory overhangs (except warning letter to Goa I) waning. Normalisation of exports dispatches is likely to improve operating leverage as well. With better visibility, we expect Indoco to maintain consistency and to generate strong FCF (FY22E FCF yield ~5%). We maintain BUY and arrive at a revised target price of Rs. 330 based on ~22x FY22 EPS of Rs. 15.

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Shares of INDOCO REMEDIES LTD. was last trading in BSE at Rs.251.55 as compared to the previous close of Rs. 259.9. The total number of shares traded during the day was 72501 in over 2513 trades.

The stock hit an intraday high of Rs. 268 and intraday low of 250.35. The net turnover during the day was Rs. 18802382.

Source: Equity Bulls

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