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Indoco Remedies: Revenue growth with better margins

News: Q2FY22 growth was led by growth in anti-infective, Gastro Intestinal, Vitamins/Minerals/Nutrients and Ophthalmic. Revenues grew 17.9% YoY to Rs.386.9 crore. Export formulations grew 11.7% YoY to Rs.135.6 crore driven by strong growth in emerging markets. Domestic formulations grew 22.5% YoY to Rs.213.6 crore due while API segment de-grew 13.5% YoY to Rs.19.7 crore. EBITDA margins expanded 384 bps YoY to 22.3% on account of lower employee expenses and better operational leverage. Subsequent EBITDA grew 42.4% YoY to Rs.86.4 crore. PAT for the quarter came in at Rs.41.7 crore up 62.5% YoY.

Views: After going through rough patches in FY18-20, where Indoco faced headwinds on the domestic front (structural issues, pandemic) and exports front (regulatory setbacks), the situation is returning to normalcy. Indoco is expected to post strong FY22 topline growth as domestic sales normalise and grow amid opportunities arising out of post-Covid complications. Export formulations are also expected to post a robust growth on the back of strong pipeline and visible launch schedule. Additionally, the management expects 80-90 bps margin improvement in FY22 to ~19%. With better visibility, we expect the company to maintain consistency and generate strong FCF.