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Suven Lifesciences: Operating Margins Improve - Views on News from Equitymaster
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Suven Lifesciences: Operating Margins Improve
Mar 17, 2017

Suven Lifesciences has announced its December quarter (3QFY17) results. The company has reported a sales growth of 2.3% YoY. While net profit grew by 42.3% YoY. Here is our analysis of the results.

Performance summary
  • Net sales were up 2.5% YoY during the quarter. Revenues from base CRAMS business stood increased by 20% YoY. The company also generated revenues worth Rs 150 m from supplies made to its client (repeat orders for a drug). However, the specialty chemicals business declined by 45% YoY.
  • Operating margins improved by 10.5%, and stood at 31.9% for the quarter. Better product mix continued to aid the margin expansion. The company has spent about close to Rs 460 m (12% of sales) in R&D which is largely towards its NCE pipeline. This cost is recorded under its subsidiary. Thus around US $ 2.5 m, which was incurred during the quarter, will be added to the R&D expenses, at the time of consolidation.
  • Owing to sharp improvement in the margins, the profits surged by 42.3% YoY.

    Financial performance Standalone: A snapshot
    (Rs m) 3QFY16 3QFY17 Change 9MFY16 9MFY17 Change
    Net sales 1,128 1,154 2.3% 3,310 3,642 10.0%
    other operating income 0 2 0 2
    Expenditure 886 787 -11.2% 2,500 2,472 -1.1%
    Operating profit (EBDITA) 242 369 52.4% 810 1,172 44.7%
    EBDITA margin (%) 21.4% 31.9% 24.5% 32.2%
    Other income 39 49 26.0% 151 162 7.2%
    Interest (net) 17 13 -23.4% 42 41 -2.4%
    Depreciation 45 49 7.9% 119 142 19.4%
    Profit before tax 219 356 62.6% 799 1,150 43.9%
    Tax 49 114 133.7% 169 316 86.9%
    Profit after tax/(loss) 171 243 42.3% 630 834 32.3%
    Net profit margin (%) 15.1% 21.0% 19.0% 22.9%
    No. of shares (m) 92.0
    Diluted earnings per share (Rs) 9.5
    Price to earnings ratio (x)* 17.9

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 3QFY16 3QFY17 Change 9MFY16 9MFY17 Change
    Manufacturing 1,028 1,068 3.9% 3,037 3,417 12.5%
    Services 100 86 -13.7% 272 226 -16.9%
    Total Sales 1,128 1,154 2.3% 3,309 3,643 10.1%
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