BP Wealth Broker Research reports

Overall mixed quarter; Growth momentum to continue in domestic business The pharmaceutical companies under our coverage is expected to post a 6.9% (YoY) growth in earnings with a 10.1% (YoY) rise in the revenue base due to decent domestic traction. Lack of meaningful approvals increasing competition in the existing product portfolio leads to muted growth in the US market. However, a substantial ramp-up of albuterol for Lupin and Ilumya uptake to offset Absorica decline for Sun pharma would support the momentum in the US for both these players. Domestic formulations are expected to grow at the higher single-digit to midteen due to continued traction in acute therapies and sustained pick up in chronic pieces. Cost pressures in the form of higher freight costs, marketing spends and raw material cost increases are likely to dent margin, which would slow...

Better realization + Higher RM cost = Moderate earning growth in Q4 We expect the companies under our chemicals coverage to report strong revenue growth (25.3% YoY) mainly led by steady demand in end-user industries and higher realization (raw material price increase pass on). We expect moderate volume growth for most companies under our coverage universe. Due to severe disruptions on supply routes, increased freight costs continued to impact imports, resulting a jump in chemical prices in the domestic market. Behind the sharp increase in the Crude oil price (+59% YoY), the base chemicals like Benzene, Toluene, Xylene, Phenol etc. have also surged between 40-90% on a YoY basis. High input costs coupled with an abnormal increase in...

Transpek Industry Limited (TIL) has posted revenue of INR 1,800mn with a 97.9% YoY increase, which was 11.7% above our estimate of INR 1,612mn. The revenue growth was mainly driven by strong volume recovery in key products due to higher offtake from MNC customers as the end-user market regained its momentum. Despite 329bps contraction in the gross margin, EBITDA margin improved by 183bps due to better cost management. The management is confident in enhancing the margin profile from the current level (guidance 18-20%) on the back of demand recovery in end-user industries and new product launches in the high margin category. TIL reported a PAT of INR 230mn compared to our estimate of INR 203mn due to better operational performance. Management is...

Hikal posted revenue of INR 5,145mn with 11.1% YoY growth which was 8.7% above our estimate of INR 4733mn driven by the strong growth in the crop protection segment. On segmental performance: The crop protection segment grew by 27% (YoY) to INR 2464mn on the back of Increased sales volume of CDMO products and favourable price increases for certain products. Pharmaceutical segment revenue remained flat at INR 2,682mn on account of slower offtake by several customers due to the higher price of products led by rising input costs. Management expects raw material challenges to continue in the next few months and is working with their suppliers and customers to mitigate the price fluctuations. Higher operational cost combined with flat revenues resulted in a...

Fine Organic Industries (FOIL) overall Q3FY22 performance came slightly above our estimates. The company reported revenue of INR 4,634mn with a 54.8% YoY increase, which was 8.6% above our estimate of INR 4,266mn. The revenue growth was driven by better realization supported by the price increase and strong volume growth. Export volume grew at a better pace with a contribution of 59%. However, domestic sales picked up at slower pace during the quarter due to the Covid19 (3rd wave) led restrictions. The company continued re-negotiating with its customers by accepting incremental business at cost-plus pricing to protect and recover from RM price volatility and higher freight costs. Despite 118bps contraction in the Gross margin, EBITDA margin managed to improve by 145bps to...

Sequent Scientific (SSL) has posted revenue of INR 3,580mn with a 0.8% YoY increase, which was 14.6% above our estimate of INR 3,124mn. The revenue beat was mainly driven by higher than expected growth in formulation business (mainly in Turkey); However, API business de-grew by 20.1% (YoY) due to lower offtake of Albendazole (key product in API). Moreover, Logistical challenges (port congestion, vessel availability) has also impacted API sales in Q3. The formulation business grew by 18.5% (YoY), led by strong performance in LATAM (+52.6% YoY) and Turkey (+34.2%) on a constant currency basis. India business performed well across both Cattle & Poultry segments with a growth of 20.5% (YoY). Revenue from Emerging markets (ex India) declined by 3.4%. Management expects a strong recovery in the API business during Q4 supported by a strong order book and revival in...

Granules (GIL) posted revenues of INR 9,968mn with 18% YoY growth, which was 5.2% below our estimate of INR 10,517mn. Revenue miss was mainly due to slower growth in the finished dosages (FD) segment. During Q3, FDs grew by 8.4% (YoY), PFIs grew by 32.4% (YoY), and API sales improved by 24.4% (YoY). GIL has witnessed an increase in key raw material costs along with higher freight costs. Despite taking price increase by renegotiation with some of its customers, continued increasing input cost and lower revenue from FD severely impacted its gross margins by 707bps (YoY), which resulted in 762bps (YoY) contraction in EBITDA margin to 17.4% (est.18.8%) in Q3FY22. The management expects to continue to pass on the RM cost increases to their customers in Q4FY22. GIL reported a PAT of INR 1009mn, which was below our estimate of INR 1192mn due to...

IG Petrochemicals Ltd (IGPL) reported a better set of numbers in Q3FY22 compared to our estimates. The company has posted revenue of INR 5,070mn with 7.6% YoY growth which was 4.2% above our estimate of INR 4,864mn. Revenue beat was mainly driven by optimum utilisation of PA4 and a higher than expected increase in the MA realisation. Despite increased contribution from high margin product (Maleic Anhydride-MA), gross margin witnessed 1203bps decline on a YoY basis due to contraction in PAN/OX spread. Absolute EBITDA grew by 16.4% YoY to INR 1121mn (est INR 758mn). However, the EBITDA margin declined by 849bps YoY to 22.1% (est.15.6%) from 30.6% in Q3FY21 due to a fall in the gross margin. PAN/OX spread is currently hovering between $150-$250 compared to a...

Neuland lab (NLL) reported revenue of INR 2,365mn (-3.6% YoY, -8.3% QoQ), which was above our estimate of INR 1799mn mainly due to lower than expected decline in the Speciality API and healthy sequential improvement in CMS business. On a segmental side, Prime API business (47% of revenue in FY21) de-grew by 19.3% YoY, mainly impacted by customers' issues on the market-share and inventory front for two of their key products ( Levetiracetam and Mirtazapine). Specialty API business had a decent quarter (+7.1 YoY) with a key contribution from Ezetimibe. Despite the absence of revenue from the Key product, CMS business reported the highest ever quarterly revenues in Q3 with a growth of 4.2% YoY basis. On a sequential basis, CMS revenue improved by 36%, on account of 173% QoQ growth in commercial revenue. Management expects at least two molecules to be...

We expect the companies under our chemicals coverage to report strong revenue growth (25.9% YoY) mainly led by restoration of demand in end-user industries, base effect and higher realization (raw material price increase pass on). We expect double-digit volume growth for most companies under our universe. Increased freight costs due to severe disruptions on supply routes continued to impact imports, resulting in a surge in selective chemical prices in the domestic market. The growth trajectory from the export market looks promising with the commissioning of new capacity for selective players. We believe that most chemical companies have ramped up their utilization levels, resulting in margin normalization. Overall, our Chemical coverage would post a Revenue/EBITDA/PAT growth of 25.9%/14.2%/14.1% YoY in Q3FY22. We expect the EBITDA margin of our coverage universe to contract by 187bps YoY, owing to elevated input costs, freight and power costs....

Fermenta bio expected to report revenue growth of 4.6% YoY to INR 941mn, despite of continued traction in the Human VD3 business (80% of overall VD3 sales H1FY22) due to planed shutdown for capacity expansion. However, owing to a high base, the EBITDA margin can contract by 887bps to...

IGPL also forayed into the downstream product by introducing speciality plasticizer DEP (Di-Ethyl Phthalate). The company commenced commercial production of DEP (in Nov 21) with a capacity of 8,400 MTPA with a 50% increasing possibility at a minimum Capex. Since the compound Relative Price Chart is a suitable solvent for many organic molecules, it is often used to bind cosmetics and fragrances (mainly incense sticks and attar). Domestic demand for DEP is 22,000 MTPA with almost the same in terms of supply. The company is planning to cross-sell this product to existing plasticizer clients since...