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Syngene International - Q2FY21 conference call takeaways - YES Securities

Posted On: 2020-10-22 22:29:59

- Mangalore operating expenses also started from this quarter; undergoing internal validation batches

- Digital - 360-degree view of labs and remote inspection made available to clients

- Depreciation includes Bangalore, Hyderabad and Mangalore facilities; about 7% of the 22% rise in staff costs is from ESOP amortization

- Tax rate to be between 10-11% due to losses from new units that have been commissioned

- US$26mn capex in H1 FY21 including US$7mn on Mangalore facility; part of residual capex within guided US$550mn would spill over to next year

- No need to reassess revenue and PAT guidance for FY21; Broad based growth expected in H2 FY21

- Mangalore asset turn of 1x over 5 years

Our view: Based on earnings call commentary, we lower tax rate to 12% in FY21 and 15% (assumed) in FY22 which leads to rise in corresponding EPS. Otherwise we reckon margins and revenue growth in FY22 is unlikely to surprise on the upside on current reading. Topline growth acceleration in H2 FY21 and a 25% growth in FY22 with 31% margin is priced in the stock and we see risk reward unfavourable at 45x FY22 PE. Our TP is unchanged at Rs330.

Results round up

- Syngene clocked revenues of Rs5.2bn +12% yoy vs estimated Rs4.8bn (+10.5% yoy est) driven by yet again discovery services and dedicated centres

- Margins came in below expectation at 28.7% vs estimated 29% as staff and other expenses remained higher yoy; we note company had started its biologic facility in Hyderabad in Dec 2019 which would have led to higher operating costs yoy especially as revenue growth remains subpar

Shares of Syngene International Ltd was last trading in BSE at Rs.536.55 as compared to the previous close of Rs. 552.25. The total number of shares traded during the day was 128920 in over 7629 trades.

The stock hit an intraday high of Rs. 553 and intraday low of 514.1. The net turnover during the day was Rs. 68161357.

Source: Equity Bulls

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