Ind-Swift Laboratories Gets Five New Approvals

Leading API manufacturer Ind-Swift Laboratories has announced that it has received USFDA approvals for five APIs (active pharma ingredients) at its Derabassi manufacturing facility.
 

The worldwide market for these products is USD 5 billion as per the BSE filing by the company, which is currently supplying these products to the US, thereby adding about 3 per cent to its topline. Going ahead the company expects the contribution of these products to go up from 3 to about 8 per cent in the next three years. Ind-Swift Labs has grown by a five-year CAGR of 27 per cent in topline and by 21 per cent in the bottomline. A rough calculation leads us to believe that these products would add about Rs 75-85 crore to the topline in the next three years, which also means 5 per cent growth in net profit.

In the latest nine-month results, the company has reported 35 per cent growth in its topline to Rs 977 crore. The bottomline growth was moderated at 11 per cent to Rs 68 crore. The EBITDA margins took a beating of 188 basis points at 16.55 per cent. The fall in EBITDA was mainly on account of the increased input costs. As per its half-yearly balance-sheet, its debt to equity ratio is 1.6x with a debt of Rs 1,018 crore.

The export growth in the latest quarter was a whopping 75 per cent which is one reason we see good revenue growth ahead. We expect the company to keep this momentum in this quarter as well. The realisation would also be better compared to the same quarter last year on the back of rupee depreciation.

On a YTD basis the scrip has appreciated by 12 per cent. On the valuation front, at a PE of 3.69x the scrip looks cheaper compared to other peers with the same market cap. Besides, its market cap to sales ratio of 0.3x is also very attractive.

The five new products will also start adding revenues to its topline. With the interest rates peaking out we expect the net profit margins to improve. Also, with its successive dividend payment history of the last eight years we would advise investors to enter the counter. One concern that we have is that its equity base has been continuously increasing which has kept the earnings under pressure. We believe that if the company raises further equity the share price will also remain under pressure.