- 21 Jul 2022
- ICICIdirect Research
Steady growth on high base; Margins missed
SYNGENE - 869 Change: 14.95 (1.75 %)News: Revenues grew 8% YoY to Rs 644 crore driven by continued momentum in Dedicated and Discovery services and incremental contribution from Development and Manufacturing services. EBITDA margins declined 94 bps YoY to 26.8% mainly due to higher other expenditure being partly offset by higher gross margins (up 772 bps YoY to 75%). EBITDA grew 5% YoY to Rs 173 crore. Net profit declined 4% YoY to Rs 74 crore. Delta vis-à-vis EBITDA is mainly due to higher depreciation, tax and interest expenses.
Views: Syngene’s Q1FY23 revenues growth was on a high base due to sales of Remdesivir in Q1FY22. Excluding the one-off sales, top-line grew ~ 30% YoY. Margins were below our expectations which is likely due to adverse operating leverage in manufacturing services. Management has raised the FY23 revenue guidance from mid-teen to high-teen due to rupee depreciation vis-à-vis US dollar and the recent agreement with Zoetis. Going ahead, Syngene’s revenue mix is expected to showcase visible shift towards development and manufacturing business, with manufacturing starting to make a more prominent role while Syngene remains a compelling play in the CRO space with elite client profile and is well positioned for sustainable growth.
Impact: Neutral