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Alembic Pharma: Mixed set of Q2 numbers, domestic growth offset by US decline

News: Revenues declined 11.3% YoY to Rs.1292.3 crore (I-direct estimate: Rs.1363 crore). Domestic Formulations grew 22.7% YoY to Rs.509 crore, better than I-direct estimates of Rs.481.4 crore due to faster recovery in acute and specialty segment. US generics de-grew 40.2% YoY at Rs.348 crore, below I-direct estimates of | 405.2 crore mainly due to price erosion and intense competition in some large products. International formulations sales remained flat YoY at Rs.197 crore (I-direct estimate: Rs.226.6 crore) while APIs de-grew 9.1% YoY to Rs.239 crore (I-direct estimate: Rs.249.9 crore) mainly due to high base of Azithromycin. EBITDA margins declined by 1053 bps YoY to 19.9% (I-direct estimate: 17.9%) mainly due to lower gross margins (down 435 bps YoY to 74.2%). EBITDA declined 42% YoY to Rs.257.2 crore as against I-direct estimate of Rs.244 crore. Net profit de-grew 49.2% YoY to Rs.169.3 crore (I-direct estimate: Rs.169.4 crore). Delta vis-à-vis EBITDA was due to higher depreciation and lower other income being partially offset by lower tax expense.

Views: Alembic reported mixed set of Q2 numbers with lower than expected sales but better than expected margins. Segment wise, Domestic business posted better than expected sales whilst sales from the US generics came in below estimates. New launches and commercialization of new facilities earmarked for the US market and consistency of performances in the Indian branded formulations are key levers for the company. However, USFDA observations for Alembic’s Injectable Facility (F-3) on re-inspection is a development to be watched, going ahead