*Sequent Scientific* – Q2FY21 (Unaudited – Cons.)
Total income from operations 346 Cr
284 Cr (21.81%) YoY | 310 Cr (15.82%) QoQ
Half yearly revenue: 656.5 Cr Vs. 562.2 Cr (5.52%)
Net Profit of 21.3 Cr
24.4 Cr (44.69%) YoY 24.4 Cr (-0.47%) QoQ
Half yearly Net profit: 45.8 Cr Vs. 39.7 Cr (47.1%)
EPS (in Rs.) 0.86
0.87 YoY | 0.85 QoQ
Half yearly EPS: 1.70 Vs. 1.34
View: Result is overall good and improved in YoY and QoQ. YoY and QoQ revenue both up although PAT declined in YoY and QoQ due to exceptional items booked an around of INR 9 Crs towards other expenditure eg. One time bonus and wind up operation of France unit after took over by Carlyle group. PBT (before exceptional items) in Q2FY21 was around INR 38.3 Crs Vs. 22.8 Crs in Q2FY20 Vs. 31.9 Crs in Q1FY21.
Q2FY21 EBITDA was around INR 59.8 Cr Vs. 37.6 Cr in Q2FY20 Vs. 52.1 Cr in Q1FY21 therefore up by 59% in YoY and 13.9% in QoQ . EBITDA margin in Q2FY21 was 17.3% Vs. 13.3% in Q2FY20 Vs. 16.8% in QoQ. Therefore improved by 400bps in YoY.
Half yearly Sep 2020 EBITDA was around INR 65.6 Cr Vs. 56.2 Cr in Sep 2019 therefore up by 16.8%. EBITDA margin was 17% Vs. 13.6% in YoY. Therefore improved by 340 bps in QoQ.
*Segment and Geographical wise performance*
*Formulations* business covered 65% of their topline
Q2FY21 Formulations revenue up by 21.1% in YoY and Half yearly its up by 13.9% in YoY. Europe business contributed 42% in topline and its up by 12.8% in YoY, Turkey contributed 17.6% in topline and its up by 23.1% in YoY, emerging markets contributed 24.7% in topline and its up by 30% in YoY and LATAM contributed 15.6% in topline and its up by 30.3% in YoY.
*APIs business* contributed 34.7% of their topline and its up by 21.8% in YoY
India: Mahad operations suspended for 10 days in Q2 FY21 due to Covid cases in the region. Vizag plant expansion project extended by 3 months.
Strong recovery in India, commercialised Zoetis products in India, achieve 2x scale.
EU: Bremer capex plans deferred to next year due to execution challenges.
Outperformance continues in Brazil and Turkey with new product launches coupled with market share gains for existing products.
EU approvals received for: World’s largest injectable filing within 11 months of filing. 3 products approvals from Spain’s R&D development
CDMO model initiated with one of the largest AH player – 2 products under execution. 1 USVMF filing in the quarter, 20 US filings in total,
ROE and ROCE is around 14% and 20% respectively and book value per share is around INR 30 and share is currently trading at 5x of its book value. Company is currently trading at annualized PE of around 42 which is high as per Industry benchmark. Promoter holding in the company is around 54.5% (Hold 53% by PE fund Carlyle) which is good and stable. FIIs and mutual fund hold around 8.4% and 4.7% in this quarter which is increased in YoY and QoQ. The good thing company is continuously reducing their debt on QoQ. Operating cash flows in this quarter was around INR 84.3 Cr Vs. 27.8 Cr in corresponding previous quarter Vs. 115 Cr in March 2020.
Share strong support price is INR 132/122. Long term investor can add the share on every dip.
Share View: Share price high 168 (52 week) and now 152. SeQuent Scientific Limited (SSL) with a global footprint, operates in the domains of Animal Health (Alivira) and Analytical Services. SeQuent has eight manufacturing facilities based in India, Spain, Germany, Brazil and Turkey with approvals from global regulatory bodies including USFDA, EUGMP, WHO, TGA among others. Its Vizag facility is India’s first and only USFDA approved facility for veterinary APIs.
India’s largest and now amongst ‘Top 20’ global animal health companies. On 11 September 2020, Carlyle through CA Harbor Investments acquired 53% stake in SSL from the secondary market. CG has informed Ind-Ra that it aims to focus on the US and European Union’s research and development (R&D) pipeline and fine tune SSL’s product development strategy. SSL has a demonstrated track record of R&D capabilities and a strong product pipeline in the animal healthcare space. Its API facility at Vizag is the only US Food & Drug Administration-approved dedicated facility for animal API production in India. The company has already commercialized 28 APIs worldwide and has filed 20 drug master files in the US. Amongst the top 3 and the largest local veterinary medicines company in Turkey having market share of 10% with more than 120 product registrations. Caters to bacterial, parasitic, anthelmentic, antiparasitic, nutritional for the ruminant therapeutics segment. Consistent financial performance and debt reduction lead to 6 step improvement over last 5 years.
During FY15-FY19, the company completed eight acquisitions at a total outlay of INR 350 Cr. The management’s willingness to add meaningful leverage to the balance sheet for mergers and acquisitions (M&As) is likely to weigh on the ratings in the short term.
SSL remains exposed to regulatory risks, as it derives nearly 50% of its revenue from the regulated markets. Any adverse impact on the EBITDA generation due to regulatory actions could result in a sustained increase in the consolidated leverage.
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