Syngene international fundamental and technical analysis
About company
Syngene initiated their operations as a CRO in 1994 with services in chemistry and biology.
Syngene International offers integrated solutions across research, development and manufacturing facilities.
Sector Overview
The Indian pharmaceutical industry is currently valued at $50Bn. India is a large exporter of pharmaceuticals with over 200 countries that receive Indian Pharma exports.
The industry growth has been at a CAGR of 9.43% over the last 9 years.
Sector Outlook
The pharma industry in India is expected to reach $65Bn by 2024 & $130Bn by 2030.
India is the world’s largest supplier of generic medications; which account for 20% of the worldwide supply by volume & supply about 60% of the global vaccination demand.
Company’s business
Syngene International has over 400 active clients and have 15 collaborations with the top 20 pharmaceutical companies.
Their sector expertise includes pharmaceuticals, biotech, nutrition, animal health, consumer goods and speciality chemicals.
About the segments
Syngene International has their presence in the following segments:
•Discovery Services
•R&D Centres
•Development Services
•Manufacturing Services
Q3 Numbers
Revenue up from ₹768 Cr in Q2 to ₹787 Cr in Q3
OPM up from 28% to 29%
NPAT up from 102Cr to 110Cr
EPS up from ₹5.53 to ₹2.73
Key Highlights:
Performance is excluding impact of Remdesivir manufacturing which had high sales growth the during first quarter of the last financial year. No sales have been recorded in 9MFY23.
Revenue from operations grew by 23% YoY, excluding Remdesivir; 28% YoY
Revenue growth driven by Discovery Service division & manufacturing division; Biologics.
Capex for 9M at 50 mn
Started a program of 30 mn for a new facility & the Capex will be reflected on the books in the next few Qtrs depending on execution
EBITDA up 15% YoY
Effective tax rate up from 19% to 21.5% YoY; however, they have a MAT credit of ₹160Cr that will be utilised over the next few years & will keep cash outflow for income tax at minimum pertained tax level
Depreciation and amortisation up by 21% YoY due to new investments
Recently completed facility will offer end-to-end solutions in drug production development & manufacturing for clinical supplies for small & large molecules
Expect the completion of additional 24,000 sqft of lab space, a new compound & mgmt facility in the current qtr.
Key Strengths
Increase in number of collaborations with emerging biopharma companies
Expect to start GMP production this quarter with the completion of sterile fill-finish facility for small scale clinical manufacturing
FIIs and DIIs have increased holdings QoQ
PAT growth at 5% YoY
Completed the US FDA, EMEA and MHRA regulatory audits for commercial scale biologics manufacturing facility
Received cGMP certifications from regulatory agencies which put them on track to manufacture drug substance on a commercial scale
Weakness
PAT growth for full year expected to be in single digits
Operating EBITDA margin down from 31.7% in Q3 FY22 to 29.4% in Q3 FY23
EBITDA margin for 9M at 29.7% compared to 31% last year
Hedge losses in Q3 FY23 at ₹16Cr compared to a hedge gain of ₹20Cr
EBITDA growth lower than revenue growth due to low scale and capacity utilisation in manufacturing
Material costs up by 6% YoY
Lowest dividend yield in pharma sector
Finance cost up from ₹9.4Cr to ₹13.7Cr due to rising interest rates;
• Numbers and Ratios
Market Cap: ₹24,076 Cr.
Stock P/E: 55.9
RoCE: 13.3%
RoE: 13.6%
PEG: 7.25
Price to Sales: 8.14
Int Coverage: 14.3
NPM: 13.9%
D/E: 0.31
• Shareholding Pattern
Promoter: 64.86%
FII: 16.87%
DII: 7.03%
Public: 10.77%
Others: 0.47%
Conclusion
The company has expanded its facilities and capabilities, receiving regulatory certifications for commercial-scale biologics manufacturing. While operating EBITDA margin has declined, completion of a sterile fill-finish facility & GMP production is expected to boost profitability.
Syngene initiated their operations as a CRO in 1994 with services in chemistry and biology.
Syngene International offers integrated solutions across research, development and manufacturing facilities.
Sector Overview
The Indian pharmaceutical industry is currently valued at $50Bn. India is a large exporter of pharmaceuticals with over 200 countries that receive Indian Pharma exports.
The industry growth has been at a CAGR of 9.43% over the last 9 years.
Sector Outlook
The pharma industry in India is expected to reach $65Bn by 2024 & $130Bn by 2030.
India is the world’s largest supplier of generic medications; which account for 20% of the worldwide supply by volume & supply about 60% of the global vaccination demand.
Company’s business
Syngene International has over 400 active clients and have 15 collaborations with the top 20 pharmaceutical companies.
Their sector expertise includes pharmaceuticals, biotech, nutrition, animal health, consumer goods and speciality chemicals.
About the segments
Syngene International has their presence in the following segments:
•Discovery Services
•R&D Centres
•Development Services
•Manufacturing Services
Q3 Numbers
Revenue up from ₹768 Cr in Q2 to ₹787 Cr in Q3
OPM up from 28% to 29%
NPAT up from 102Cr to 110Cr
EPS up from ₹5.53 to ₹2.73
Key Highlights:
Performance is excluding impact of Remdesivir manufacturing which had high sales growth the during first quarter of the last financial year. No sales have been recorded in 9MFY23.
Revenue from operations grew by 23% YoY, excluding Remdesivir; 28% YoY
Revenue growth driven by Discovery Service division & manufacturing division; Biologics.
Capex for 9M at 50 mn
Started a program of 30 mn for a new facility & the Capex will be reflected on the books in the next few Qtrs depending on execution
EBITDA up 15% YoY
Effective tax rate up from 19% to 21.5% YoY; however, they have a MAT credit of ₹160Cr that will be utilised over the next few years & will keep cash outflow for income tax at minimum pertained tax level
Depreciation and amortisation up by 21% YoY due to new investments
Recently completed facility will offer end-to-end solutions in drug production development & manufacturing for clinical supplies for small & large molecules
Expect the completion of additional 24,000 sqft of lab space, a new compound & mgmt facility in the current qtr.
Key Strengths
Increase in number of collaborations with emerging biopharma companies
Expect to start GMP production this quarter with the completion of sterile fill-finish facility for small scale clinical manufacturing
FIIs and DIIs have increased holdings QoQ
PAT growth at 5% YoY
Completed the US FDA, EMEA and MHRA regulatory audits for commercial scale biologics manufacturing facility
Received cGMP certifications from regulatory agencies which put them on track to manufacture drug substance on a commercial scale
Weakness
PAT growth for full year expected to be in single digits
Operating EBITDA margin down from 31.7% in Q3 FY22 to 29.4% in Q3 FY23
EBITDA margin for 9M at 29.7% compared to 31% last year
Hedge losses in Q3 FY23 at ₹16Cr compared to a hedge gain of ₹20Cr
EBITDA growth lower than revenue growth due to low scale and capacity utilisation in manufacturing
Material costs up by 6% YoY
Lowest dividend yield in pharma sector
Finance cost up from ₹9.4Cr to ₹13.7Cr due to rising interest rates;
• Numbers and Ratios
Market Cap: ₹24,076 Cr.
Stock P/E: 55.9
RoCE: 13.3%
RoE: 13.6%
PEG: 7.25
Price to Sales: 8.14
Int Coverage: 14.3
NPM: 13.9%
D/E: 0.31
• Shareholding Pattern
Promoter: 64.86%
FII: 16.87%
DII: 7.03%
Public: 10.77%
Others: 0.47%
Conclusion
The company has expanded its facilities and capabilities, receiving regulatory certifications for commercial-scale biologics manufacturing. While operating EBITDA margin has declined, completion of a sterile fill-finish facility & GMP production is expected to boost profitability.