Earnings Report /
Bangladesh

IBN SINA Pharmaceutical: IBNSINA Q1 FY23: C2% yoy earnings growth driven by c4% yoy revenue growth

  • Challenging macroeconomic conditions, and higher revenue growth base in Q1 FY22 are major drivers.

  • Prescription drug sales increased in Q1 FY22 which making it difficult to attain higher growth in Q1 FY23.

  • We reiterate BUY recommendation with TP of BDT 380.0 (ETR 34.9%).

IDLC Securities
14 November 2022
Published byIDLC Securities
  • EPS grew 1.9% yoy in Q1 FY23. EPS in Q1 FY23 stood at BDT 4.63 against BDT 4.54 reported in Q1 FY22. NPAT in Q1 FY23 stood at BDT 145 mn against BDT 142 mn in Q1 FY22. Challenging macroeconomic conditions, and a higher revenue base in Q1 FY22 led to single digit revenue growth and thereby low earnings growth in Q1 FY23.

  • Revenue grew 3.8% yoy in Q1 FY23. Revenue registered a slight increase from BDT 2,365 mn in Q1 FY22 to BDT 2,455 mn in Q1 FY23. As the economy began to recover and doctors resumed their practice, the sales of prescription drugs increased substantially in Q1 FY22. This made it comparatively difficult to attain higher growth in Q1 FY23 as a result of the base effect.

  • Flat gross margin in Q1 FY23 while opex to sales ratio surged 67 bps in Q1 FY23. Despite some peer companies in the sector suffered from margin erosion due to higher raw material costs because of the BDT depreciation, IBNSINA maintained its gross margin remained flat. Opex to sales ratio increased to 32.6% in Q1 FY23 against 32.0% in Q1 FY22. Inflationary pressure in the macroeconomy likely caused growth in operating expenditures and led to a 3.5% yoy decline in operating profit.

  • Effective tax rate fell 331 bps yoy in Q1 FY23. In FY22, IBNSINA reported tax at 20.5% tax rate, suggesting they meet the criteria to avail reduced tax rate. Therefore, we believe the fall in effective tax rate from c31% in Q1 FY22 to c28% in Q1 FY23 is likely due to IBNSINA meeting the tax cut requirements.

  • We reiterate BUY recommendation with TP of BDT 380.0 (ETR 34.9%). The TP implies 17.3x FY23 P/E, 1.3x FY 23 EV/Sales, and 12.7x FY23 EV/EBITDA.