Alembic Pharmaceuticals Ltd Q1 FY23 Result Updates. Profitability declined due to sales decline and increased costs.

Alembic Pharmaceuticals Ltd Q1 FY23 Result Updates.
Profitability declined due to sales decline and increased costs.

The company witnessed a 4.8% YoY (-10.8% QoQ) decline in the revenue to Rs. 12.62 bn in Q1FY23. This was due to flat to a decline in the US, Ex-USA, and India formulations revenue as well as in the API revenue on a YoY basis, in Q1FY23.
The EBITDA margins declined 871 bps YoY (-222 bps QoQ) to 9.1% and EBITDA declined 51.4% YoY (-28.4% QoQ) to Rs. 1.15 bn in Q1FY23.
The company incurred a net loss of Rs. 659.0 mn in Q1FY23 vs. net income of Rs. 355.0 mn in Q4FY22 and a net profit of Rs. 1.65 bn in Q1FY22. Adjusting for the unusual expenses, the company’s adjusted net profits declined 70.2% YoY (+38.3% QoQ) to INR 491.0 mn in Q1FY23.

Revenue decline across segments.

The US revenue declined 0.5% YoY (-34.1% QoQ, 29.0% of revenue), the Ex-USA revenue declined 7.6% YoY (-3.2% QoQ, 14.0%), India revenue declined -0.2% YoY (+6.9% QoQ, 38.0%) and API revenue declined 16.5% YoY (+5.0% QoQ, 18.0%). The US revenue was flat YoY due to price erosion across the portfolio; partially offset by higher volumes with market share gains. The sequential revenue growth was negative for the US, due to the higher stocking carried out by the distributors in Q4FY22. India’s revenue was affected due to the higher base effect of Q1FY22 with more of COVID 19 product sales then. However, excluding COVID 19 sales, India branded business revenue would have grown at 20.0% YoY in Q1FY23. The API sales decline was due to lower volumes in Q1FY23.

The company’s gross profit margins (GPMs) declined 131 bps YoY (-374 bps QoQ) to 70.0% in Q1FY23 due to increased raw materials costs (as a % of revenue) in Q1FY23. Gross profits declined 6.1% YoY (- 14.2% QoQ) to Rs. 8.84 bn. Also, the EBITDA margins declined 871 bps YoY (-222 bps QoQ) to 9.1% and EBITDA declined 51.4% YoY (-28.4% QoQ) to Rs. 1.15 bn in Q1FY23. The company’s employee costs remained flat YoY (+4.8% QoQ) and other expenses increased 15.3% YoY (- 19.2% QoQ). However, with a 41.5% YoY (-89.3% QoQ) fall in other income, Rs. 1.15 bn of Aleorrelated unusual impairment expenses, and a 316.6% YoY (+31.2% QoQ) rise in interest expenses.

With the change in crude oil prices, the company is witnessing an increase in costs such as of solvents and materials costs but is trying to contain the costs as much as possible. The margins have eroded in the US across therapy products.

The shares of Alembic Pharmaceuticals Ltd. are trading at Rs. 658.95, up by 1.36%.

Valuations:
The return on equity (ROE) is 10% for the quarter ended June 2022. The price-to-earning (P/E) ratio stood at 43.7. The return on capital employed (ROCE) for the company is 11.1%. The price to book value of Alembic Pharmaceuticals Ltd. is 2.46. The EV/EBITDA is 19.3. EPS during the quarter came at Rs. 16.