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Suven Lifesciences: Net Margins Improve due to lower tax outgo in the quarter. - Views on News from Equitymaster
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  • May 24, 2017 - Suven Lifesciences: Net Margins Improve due to lower tax outgo in the quarter.

Suven Lifesciences: Net Margins Improve due to lower tax outgo in the quarter.
May 24, 2017

Suven Lifesciences has announced its March quarter (4QFY17) results. The company has reported a sales growth of 3.3% YoY, while net profit grew by 7.8% YoY. Here is our analysis of the results.

Performance summary
  • Net sales were up 3.3% YoY during the quarter. Revenues from speciality chemicals business increased to Rs. 1016 m from Rs. 270 in the last quarter. Core CRAMS business contributed Rs. 614.5 m to revenues with Rs. 119.6 m coming from services.
  • Operating margins declined slightly by 220 basis points, and stood at 26.7% for the quarter. This was mainly due to increased contribution from Speciality chemicals business which is a slightly lower margin business as compared to core CRAMS. The company has spent about close to Rs 650 m (12% of sales) in R&D which is largely towards its NCE pipeline. The consolidated R&D expenses stands at Rs. 991 m for FY 2017.The company expects a 10-15% increase in consolidated R&D expenses in FY2018.
  • Net profits increased by 7.8% mainly on account of lower tax outgo.

    Financial performance Standalone: A snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Net sales 1,694 1,750 3.3% 5,003 5,392 7.8%
    other operating income 0 52   0 2  
    Expenditure 1,204 1,320 9.6% 3,704 3,791 2.4%
    Operating profit (EBDITA) 490 482 -1.6% 1,299 1,602 23.3%
    EBDITA margin (%) 28.9% 26.7%   26.0% 29.7%  
    Other income 42 49 16.7% 193 211 9.3%
    Interest (net) 17 16 -6.4% 59 57 -3.6%
    Depreciation 56 72 28.8% 175 214 22.3%
    Profit before tax 459 444 -3.5% 1,259 1,594 26.6%
    Tax 88 43 -51.2% 257 359 39.7%
    Profit after tax/(loss) 372 401 7.8% 1,002 1,235 23.2%
    Net profit margin (%) 22.0% 22.9%   20.0% 22.9%  
    No. of shares (m)         127.3  
    Diluted earnings per share (Rs)         9.7  
    Price to earnings ratio (x)*         18.3  
    *based on trailing 12 months earnings

    Business Mix
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Manufacturing (CRAMS) 1,634 1,750 7.1% 4,671 5,167 10.6%
    Services 52 51 -0.4% 324 278 -14.3%
    Total Sales 1,686 1,801 6.8% 4,995 5,445 9.0%
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