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Q2FY20 revenue grew by ~200% YoY on account of higher sales in CRAMS (+186%) and specialty chemicals (currently 2 products) EBITDA & PAT registered a +300% growth each YoY on account of increase in high margin commercial CRAMS sales, lower employee cost & other expenses as a percentage of sales. Clinical trial data on molecule SUVN-502 which got delayed is expected to be available in 3 weeks time and will be presented in CTAD 2019 - Alzheimer Congress at San Diego, USA ....
The volatile quarterly performance is inherent to CRAMS business models. So, it would be inappropriate to extrapolate this quarter's performance to the full year of FY20E. Historically, both in FY18 & FY19, operational performance has recovered strongly in 2H. This year too, on the back of higher commercial orders in India and Swiss coupled with the new development capacity, we expect the company to overshoot its guidance of 10% YoY revenue growth and 26-27% EBITDA margin. Expect 19% EPS CAGR over FY19-21E. Unlike generic pharma companies, this business is more sustainable and insulated from pricing pressure until patent expiry. Hence, DCAL merits a higher multiple as it is trading at 10.1/7.9x FY20/21E EPS, a ~60% discount to peers. We maintain a BUY on DCAL following a disappointing quarter. Our TP is revised to Rs 355 (15x FY21E EPS) with a 5% cut to FY21E EPS (higher depreciation expectation).
We remain constructive on DCAL owing to strong visibility on its order book, 15+ late phase 3 molecules, expanded development capacity, ability to work on new molecules like ADCs, and favorable currency. Improvement in BS driven by reduced debt and working capital release would be one of the important parameters to drive re-rating of the stock. At CMP, the stock is trading at 10.1/7.8 FY19/20E, a ~60% discount to peers like Divi's Labs. Maintain BUY with a TP of Rs 350 (15x FY21E EPS). DCALs FY19 annual report reflects pleasing YoY progress on key P&L; metrics like revenue (+22%), EBITDA margin (+50bps) and earnings (+26%), which is attributed to the surge in revenues from India CRAMS and Vitamin D segments. The operational performance of FY19 was largely in-line with our estimates at the beginning of the fiscal. However, improvement in the BS and CF remained slow as the elevated capex and higher working capital led to negative free cash flows and only a 6% reduction in net debt. DCAL is expected to compensate for the lack of dividend over the last two years in FY20E.
CRAMS business revenue (Rs3,774mn) is down 20.0% QoQ but up 11.9% YoY. CRAMS business performance is volatile due to timing of orders / shipment. The marketable molecule revenue (Rs1,239 mn) is down 11.2% QoQ but up 11.3% YoY. Within the marketable molecule space, the cholesterol business, which has relatively lower margins, gained larger proportion of the mix and hence EBITDA margin was lower during the quarter. Focus in the marketable molecule category is to expand Vitamin D analogue business which is high margin. EBITDA stood at Rs1,194mn, which is 8.1%/32.5% below our/consensus estimate, respectively. EBITDA declined by 29.5% QoQ and 1.1% YoY. EBITDA was adversely impacted by higher COGS...
DCAL Q1FY20 revenue came below our estimate at INR 5,219mn (est. INR5,461mn) Up 8.2% YoY due to flat revenue growth from Carbogen Amcis AG with 52% contribution in Q1 revenues. CRAMS India revenues grew by 28% YoY and accounted for 15% of the revenue. Carbogen Amcis BV revenues increased by 8.6% YoY on account of better sales of Vitamin D analogues and cholesterol....
NCC has seen significant de-rating post the AP Govt order cancellation and uncertainty of execution on balance Rs 125bn of AP order book. Our channel checks will local Govt officials suggest work of significant importance will start in next 3months. We ascribe low probability of further project cancellation for NCC in AP. Debt levels may remain at current levels, though AP receivable realization may take time. Sembcorp arbitration will unlock Rs 4-5bn of cash inflow. With inexpensive valuation (6.3x Core EPC FY21E EPS) and receding headwinds we maintain BUY. Key risks (1) Adverse ruling on ongoing arbitrations; (2) Slow down in government capex; (3) Deterioration in NWC days; and (4) Weak real estate monetization. NCC reported inline 1QFY20 performance with Rev/EBIDTA/APAT beat of (4.5)/2.5/1.6%. We expect AP projects execution to resume from Oct-19. Core EPC valuation is inexpensive at 6.3x FY21E EPS. Maintain BUY with a TP of Rs 154/Sh (EPC business at 15x FY21E EPS).
Lower revenue weighs down EBITDA and PAT: Revenue decline of 8% YoY to INR698m (15% below est.) was a first in many quarters. Delayed national campaigns, decreasing low-yield local ads, and muted government/political advertisements led the revenue decline. Yield rose 4% in the top-12 markets. EBITDA declined 21% YoY to INR205m (22% miss) on pre Ind-AS 116 basis (EBITDA was INR18m on reported basis, down 14% YoY). EBITDA margins were down 500bp to 29.4%, (260bp miss), as opex remained flat QoQ. Subsequently, PAT declined 36% YoY to INR87m on pre Ind-AS 116...
1QFY20 PAT of INR3.7b (significantly ahead of estimates), was led by higher treasury gains and lower provisions of INR7.9b (v/s est. of INR10.6b). NII declined 1% YoY to INR17.8b (in-line); however, domestic margins declined 10bp QoQ to 2.9% due to 5bp increase in cost of funds. Other income grew 58% YoY led by treasury gains of INR2.0b. Total income trailed opex growth of 16% YoY, resulting in modest PPoP growth of 6% YoY. C/I ratio stood at 44.6% (v/s 46.6% in 4QFY19). Loan book grew 12% YoY (2% QoQ decline) to INR1.8t while deposits grew...
We hosted a concall with Dishman Carbogen Amcis ltd management with institutional Investors considering the recent steep correction in stock price post week long IT search operations conducted at various company premises. Overall the company does not anticipate a materially adverse outcome from the IT investigation and reinstated its commitment to highest standards of corporate governance and ethics. From a business perspective they also reinstated their guidance for 8-10% revenue growth and EBITDA margins around 27%. IT search operations were done very courteously and the company extended full cooperation to the IT officials. The data needs of the IT department could be immediately addressed as they have...
Dishman Carbogen Amcis' or DCAL's 2QFY20 revenue at Rs4,673mn is 14.2%/11.8% below our/consensus estimate, respectively. Net profit at Rs412mn is below our/consensus estimate by 5.8%/16.8%. Revenue is lower than our estimate as commercial manufacturing orders were deferred to subsequent quarters, but margins exceeded estimates due to higher proportion developmental supplies in CRAMS revenue (75% of CRAMS revenue). For the full year, company maintains its guidance of 8-10% revenue growth and EBITDA margins in the 26-28% range. With the 1H revenue around Rs9.86bn, we should witness second half revenue aggregating to Rs12bn. Growth in revenue would be driven by a ramp up in commercial...
Owing to debt levels at promoter level, Zee Media along with other group companies' shares were pledged. In January 2019, 72.92% of promoter's 67.02% stake of Zee Media Corp was also pledged, after which there was a sale of shares by some lender/promoter over the said concerns. Currently, promoter holding in Zee Media as of June 2019 is at 55.12%, out of which 93.55% is pledged. We also note the uncertainty faced by Zee Media (saw a sharp correction of 63% in stock price last year). Moreover, promoters also made clear what their priority would be given Zee Entertainment and Dish...
Extended monsoon, delays in water division payment from Telangana Govt and resurvey/change in scope of electrical division orders impacted 2QFY20 execution. AP orders resumption remains a black box. Despite this, we believe that 2QFY20 is an execution bottom for NCC. We have built in Rs 23/32bn revenue for NCC during 3Q/4QFY20. We are now entering bid heavy 2HFY20 and NCC stands to gain from the same. Resumption in AP order execution (from 3QFY20) and likely favorable Sembcorp settlement by Mar-20 (unlocking Rs 4-5bn of cash inflow) are key re-rating tailwinds. We have cut FY20/21E EPS by 22.4/18.2%. Maintain BUY with reduced TP of Rs 127/sh. Key risks (1) Adverse ruling on ongoing arbitrations; (2) Slow down in government capex; (3) Deterioration in NWC days; and (4) Weak real estate monetization. NCC reported a weak headline 2QFY20 performance, Rev/EBIDTA/APAT miss of 22/11/38%. With tailwinds like (1) Resumption of stuck AP orders (Rs 110bn, 33% order book) (2) Pick-up in new order inflow & (3) Sembcorp settlement, NCC de-rating may have settled for now. We maintain BUY with reduced TP of Rs 127/Sh (EPC business at 15x FY21E EPS) vs. Rs 154/sh earlier.
Poor Performance on Soft Execution & Projects Disruption in AP NCC (NJCC) has reported a poor performance in 1QFY20, as projects cancellation, reassessment of projects and payment delays impacted its revenue booking. Resultantly, revenue declined by 7% YoY and 35% QoQ to Rs21.8bn. EBITDA broadly stood flat on YoY basis at Rs2.66bn, while EBITDA margin stood at strong 12.2% (+84bps YoY and +45bps QoQ) mainly led by settlement of claims with the clients during the quarter. Dismal revenue booking along with higher finance cost (+24% YoY and +8% QoQ) and lower other income (-15% YoY and -31% QoQ) led to steep 21% YoY decline in net profit to Rs813mn. A high exposure in AP and political shift in the state along with general slowdown led by...
30 October 2019 SBINs management provided the baseline guidance on the key financial parameters for FY20/21. It expects the bank to deliver an RoA of 0.4%-0.5% in FY20 and 0.9%-1.0% in FY21, led by (a) credit growth of ~10%/12% with an NIM of 3.15%-3.2%, translating into NII growth of 17%/14% for FY20/21, (b) non-interest income growth of 15% for both years with opex growth sustaining at <10% and (c) a slippage ratio of 2.0%/1.3% in FY20/21, leading to credit cost of 1.8%/1.0%. Corporate slippages are guided at INR220b/INR120b for FY20/21, significantly lower than the historical run-rate. SBIN is targeting PPoP of INR650b/INR750b for FY20/21. Under a stress- case scenario, PPoP is estimated at ~INR700b with an RoA of 0.
All the three OMCs IOCL, BPCL and HPCL reported Q2 FY20 earnings well below estimates, impacted by low GRMs (US$3.8-US$3/bbl), under- performing the benchmark Singapore (US$6.5/bbl).
Contrary to investment wisdom SEL has corrected sharply when it is perceived to get significantly deleveraged over next 2-3months. Asset light model, selective focus on EPC projects bidding, ROFO on HAM assets, 10% stake in IndInfraVit (already SIPL is in the money) and potential resolution to bleeding Rohtak Panipat project are other key re-rating triggers. Merger may be another positive as combined entity curtails equity intensive projects and surplus cash is utilized towards pursuing growth, without equity dilution. SEL is in a sweet spot. CPPIB backing is literally a large bank support. We maintain BUY. Key risks (1) Delay in SIPL stake sale; (2) Slow order inflows; and (3) Further delay in appointed dates. We maintain BUY on SEL with a reduced TP of Rs 269/sh (vs. Rs 340 earlier). We value SELs EPC business at 15x FY21E EPS and assign a 20% hold co discount to SIPL stakes market value. Price cut is on account of FY20/21E EPS downgrade by 24.4/20.4%.
