Alembic Pharmaceuticals Ltd Research ReportQ3FY21

Subdued US hinders overall growth… Q3 results were a mixed bag. While operational performance was below Idirect estimates amid lower than expected International (mainly US) and API sales, net profit was higher due to higher-than-expected profit contribution from Rhizen Phama (one-off). Revenues grew 8.7% YoY to | 1314 crore led by strong growth in domestic, ROW formulations and API segment. US sales growth remained muted (down 0.6% YoY) at | 512 crore due to competition in Sartans. Domestic formulations grew 13.6% YoY to | 418 crore. EBITDA margins expanded 89 bps YoY to 27.8% due to better gross margins and lower R&D cost. Subsequently, EBITDA grew 12.3% YoY to | 365 crore. Net Profit grew 24.9% YoY to | 293 crore. Domestic growth to remain steady… Domestic sales comprise 31% of FY20 revenues with higher contribution from specialty (54% of domestic sales). However, despite having an established set-up, growth (FY16-20 CAGR of ~5%) has lagged the industry growth curve. Alembic is consciously focusing on this aspect by overhauling distribution channels (defocusing on trade generics). Overall, we expect domestic formulations to grow at 9.6% FY20-23E CAGR to | 1875 crore.