Shilpa Medicare Q2 Results Review - Margin Woes Continue: ICICI Securities
Company reported worst Ebitda margin in several years due to unfavorable revenue mix, pricing pressure, high raw material costs.
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ICICI Securities Report
Shilpa Medicare Ltd.’s Q2 FY23 performance was a big miss on profitability front. Revenue declined 11.0% YoY to Rs 2.6 billion (our estimate: Rs 2.6 billion) due to decline in sales in formulation segments.
Ebitda margin at 4.9% (our estimate: 12.0%) contracted 1,340 bps YoY and 320 bps QoQ.
Shilpa Medicare reported a loss of Rs 187 million (our estimate: profit of Rs 59 million) in Q2 FY23.
Active pharma ingredient plus contract research and manufacturing servives revenue remained flattish YoY to Rs 2.0 billion, while formulations revenue fell 28.5% YoY to Rs 637 million.
Shilpa Medicare is hopeful of U.S. Food and Drug Administration re-inspection of the Jadcherla formulations unit, which has been under import alert.
While revenues are set to grow at a steady pace, U.S. FDA resolution is critical for faster growth. So, we remain cautious on the stock. However, significant correction (~25% in the past three months) has made valuations fair.
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