INDOCO Analysis 19 Jan 2021

Making H3L (HH HL) on Daily.
Sideways Consolidation Since 16 OCT 2020
Made a Tail on RED day yesterday ie 18 Jan 2021

Comment: Weekly Trendline BO
on 14 Sep 2020 with WRC and VOLEXP

Comment: Monthly

Comment: Indoco Remedies Q3 PAT seen up 191.2% YoY to Rs. 9.3 cr: Prabhudas Lilladher
Comment: 75m TF

Comment: US business on strong footing led by ANDA pipeline monetization
Indoco Remedies’ (IRL) 2QFY21 revenue at Rs3,282mn grew by 12.2% YoY (up 21.1%
QoQ) and was 14% higher than our estimate. EBITDA at Rs607mn increased by 25%
QoQ and 86% YoY and was above our estimate by 19%. EBITDA margin improved to
18.5%, up by 735bps YoY on account of higher gross margin (72.5%) and lower other
expenses. The same was offset by higher staff costs due to higher provisions for
annual revisions. While the EBITDA margin saw a significant improvement, the
management has guided for some softening in the same in 2HFY21 as the domestic
business will be relatively weaker. Net working capital has reached stretched levels
due to decrease in payable days and higher inventory amid COVID uncertainties and
to support new launches in the US and Europe. Net profit stood at Rs257mn, up
50.5% QoQ. Net profit growth outpaced revenue growth, driven by higher gross
margin and lower other expenses. Savings on account of lower sales & promotion
and travelling expenses should gradually subside over the year.
US and Europe to drive revenue growth: Revenue growth in 2QFY21 was aided by growth in
regulated markets, driven especially by Europe and the US markets. The company maintains its
annual guidance of Rs2,250mn in annual revenue from Europe, which implies 20% upside from the
current annual run rate. US revenue grew by 62% sequentially and stood at Rs434mn. The company
currently has 4 oral solids and 4 injectable products in the US. The company expects to
commercialize 2 limited competition ophthalmic products in the US over the next one year. The US
revenue is expected to grow to Rs2,500mn next year on the back of existing products and new
India business yet to fully recover: Domestic business revenue grew sequentially but was down
YoY at Rs1,747mn. The business underperformed YoY as growth in the chronic portfolio was offset
by weakness in the acute portfolio. The company has launched FEVINDO 400 (Favipiravir), which is
effective against Covid-19. In addition, the company's brands, viz. Karvol Plus, ATM, Febrex Plus and
Rexidin SRS mouthwash are being used in the prevention of Covid-19.
Partnership with TEVA: Out of the 18 products for which it has partnered with Teva, 8 have been
retained by the latter while the other ANDAs are in the process of being transferred back to Indoco. Of
these, two are in the final stages of the process and should be launched once they are able to close
some commitments to the USFDA on the same.
Outlook and valuation: We have tweaked our estimates on IRL but maintained our target price (TP)
of Rs322 based on the risk-adjusted 16x P/E on September FY22E EPS. We have a Buy rating on
Trade closed manually: Trade closed as it hit SL


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