driven by positive operating leverage. During the quarter the company incurred one-time expenses of BSE code INR 90mn (onetime bonus and ESOPs of INR 52.1mn and INR 38.3mn related to discontinuation of Alivira France operations) under Exceptional item. SSL reported a PAT of INR 213mn compared to our estimate of INR 250mn. Adjusting onetime expenses, the Normalised PAT came in at INR297mn...

Sequent Scientific or SSL's 2QFY21 revenue at Rs3,463mn was higher than our estimate by 9.8%. Revenue grew by 21.8% YoY and 11.6% QoQ and was led by strong growth in the Emerging Markets (EM) and API sales. EM growth (135% QoQ) was led by the integration of Zoetis portfolio and revival in demand from the Poultry segment. Poultry demand had been subdued on account of COVID concerns. Revenue growth translated into EBITDA margin expansion of 47bps QoQ and 348bps YoY. The ROCE of the business is now in early 20s and operating cash flow is also robust. EBITDA to cash...

Sequent Scientific or SSLs 1QFY21 revenue at Rs3,103mn was higher than our estimate by 1.6%. Revenue grew by 11.6% YoY and was led by growth in both API and formulation sales across geographies, except the Emerging Markets (EM). There was a conscious decision to slow down in EMs considering the risk of bad debts. However, the situation is now normalizing and we should see sales in EMs back on track. Incrementally, the company has also entered into a distribution agreement with global animal health giant Zoetis for distribution of their products in India. The agreement gives SSL right to a portfolio of 13 brands (19 SKUs) amounting to Rs400mn in annual sales....

Sequent Scientific or SSL's 4QFY20 revenue at Rs3,006mn was lower than our estimate by 19.9%. Revenue grew by 6.6% YoY and was led by growth in both API and formulation sales across geographies except Emerging Markets (EM). Gross margin improved 140bps QoQ, primarily led by an increase in API sales and strong performance in Turkey, which is a higher margin business. With API business expected to get stronger from here on and no headwinds in Turkey, we should see margin further build up from current levels. The larger margin driver in the near to medium term would be the first generic launch of injectable in Europe. For FY21, the company has refrained from giving a...

Carlyle to acquire Sequent Timing not right, impacts deal valuation Global investment firm The Carlyle Group (US$224bn AUM) has made an open offer of Rs86 per share to acquire majority stake (up to 74%) in Sequent Scientific. The open offer is triggered by its share purchase agreement (SPA) to acquire 44.9% equity stake from the promoter group at Rs86 per share. The cumulative holding of the promoter group stands at 56.15%. The residual promoter holding of 11.29% (not offered so far under SPA) is held by Mr. K. R. Ravishankar. This may also be available to Carlyle post closure of the open offer (assuming Carlyle does not reach the threshold of 74%). Carlyle has also signed a SPA with...

Sequent Scientific or SSL's 3QFY20 revenue at Rs3,164mn was higher than our estimate by 7.4%. Revenue grew by 17% YoY and was led by growth in both API and formulation sales. API sales grew by 17.8% YoY and the formulations business grew by 16.5% YoY. Growth in API sales (20 -30%) should sustain at least until the end of FY21 as the company continues to build sales in regulated markets. The company is investing to implement additional API capacities with an objective to sustain growth trajectory...

Sequent Scientific or SSL's 2QFY20 revenue at Rs2,842mn was in line with our estimate. Revenue grew by 14.5% YoY (cc) and was primarily led by growth in API sales. API sales grew by 30% YoY and now contribute 33% to total sales. The growth in API sales should sustain at least until the end of FY21 as the company expects to monetize its niche VMF (Veterinary master files) filings with low competitive intensity. About 5 of the 17 VMF filings of Sequent Formulations are niche, where SSL is the only filer. Formulation sales grew slower at 8% during the quarter as the company's largest geography Europe underperformed and declined 2.5% YoY. The decline in Europe is transient and was...

Sequent Scientific or SSL's 2QFY20 revenue at Rs2,842mn was in line with our estimate. Revenue grew by 14.5% YoY (cc) and was primarily led by growth in API sales. API sales grew by 30% YoY and now contribute 33% to total sales. The growth in API sales should sustain at least until the end of FY21 as the company expects to monetize its niche VMF (Veterinary master files) filings with low competitive intensity. About 5 of the 17 VMF filings of Sequent Formulations are niche, where SSL is the only filer. Formulation sales grew slower at 8% during the quarter as the company's largest geography Europe underperformed and declined 2.5% YoY. The decline in Europe is transient and was...

Sequent Scientific or SSLs 1QFY20 revenue at Rs2,780mn was below our estimate by 3.6%. On a QoQ basis, the performance was flattish across segments, except Emerging Markets formulations business, which grew by 14% QoQ. API sales (Rs900mn) were up 50% YoY but declined by 10% QoQ. The company is expecting API sales to exceed Rs 4000mn in FY20 and hence the run-rate in coming quarters should strengthen. To ensure enough capacities for the near to medium term the...

Sequent Scientific or SSL's 4QFY19 revenues at Rs 2,819mn in 4QFY19 were below our estimate by 2.2%. API business continued its strong growth momentum, growing 74.9%%/13.3% YoY/QoQ, respectively. The penetration of top 10 global animal health players in the API segment improved which allows for better realisation. The API business is expected to continue traction as the company continues to build its presence in regulated markets which allow much higher prices. The company has given growth guidance of around 30% in FY20 in the API segment and mid-teen...

Incorporated in 1985, SeQuent Scientific Ltd (SSL) undertakes its animal health business via Alivira Animal Health Limited, which is engaged in manufacturing veterinary APIs and formulations. Earlier SSL was engaged in the manufacturing human APIs, which has been demerged with effect from October, 2017. SSL is now involved in manufacturing Praziquantel a human and animal API and intermediates. SSLs subsidiary - SeQuent Research Limited - offers analytical services to the pharma industry. SSLs (consolidated) portfolio consists of about 23 commercial products in animal health API and over 500 products across 12...

Sequent Scientific or SSL's revenues at Rs2,705mn in 3QFY19 were above our estimate by 9.6%. API business continued its strong growth momentum, growing 60%%/21% YoY/QoQ, respectively. API sales continue to be driven by a growing proportion of sales to top 10 global animal health players which fetch better prices. The momentum in API sales is expected to continue over the next year too as more...

Sequent Scientific or SSL's revenues at Rs2,517mn in 2QFY19 were above our estimate by 10.1%. API business surprised us during the quarter as it grew 40%/23% YoY/QoQ, respectively. API business growth was driven by improved geography mix, price increase and volume growth. Around 75% of the growth in API was driven by product mix and price increase. Formulations business performance was adversely impacted by currency depreciation, but the fundamentals remain strong...

We met the management of Sequent Scientific (Sequent) to gain an insight into the company's animal health business. Sequent is a vertically integrated, global animal health company with seven manufacturing facilities in India, Spain, Germany, Brazil and Turkey. Formulations contributed ~75% of total revenues in FY18 with the rest from API segment. In formulations, the company has a strong presence in Europe, Latin America, Turkey, India, Africa and Southeast Asia markets. Recently, it forayed into France and Ukraine. In API segment, top 10 global animal...

Regulatory Changes And Adverse Forex Movement Dampens Momentum Sequent Scientific or SSL's revenues at Rs2,369mn in 1QFY19 were in line with our estimate. EBITDA at Rs250mn was up 70% YoY and down 19% QoQ as regulatory changes in Turkey impacted performance. Turkey, which is the single largest geography for SSL's formulations business, witnessed an adverse impact of new regulations to ensure judicious use of antimicrobials. This led to a decline in primary sales. SSL is the third-largest player in Turkey with a 10% market share, and on QoQ basis the sales declined almost 40% from Rs 400mn to Rs 243mn. The company expects sales in Turkey to be back to normal by the end of FY19. Animal API business, which accounts for about 25% of its sales, reported strong growth (4% QoQ and 12.3%...

SEQ IN in 4QFY18 were up 3.5% QoQ and above our estimate by 1.8%. EBITDA at Rs303mn was up 29.7% YoY. Revenue growth was driven by formulations as well as improvement in the price environment for API business. EBITDA margin...

Sequent Scientific (SSL) has announced its acquisition of Bremer Pharma, Germany, on 17 April 2018. Founded in 1982, Bremer Pharma is the animal health subsidiary of Zydus Cadila. With a paid-up capital of US$0.59mn, it reported top-line revenues of US$8.3mn with a marginal loss in FY17. With about 400 product registrations, Bremer Pharma supplies vitamins, antibiotics and hormones. The product registrations are across Europe, MENA region, Russia and Africa. Acquisition cost: Total EV is about US$2.8mn, of which the share purchase price is US$1.08mn and loan purchase price is US$1.72mn. This works out to EV/sales multiple of...