Earnings Report /
Bangladesh

Renata: Q1'23: EPS -9.9% yoy, due to high financial & operating costs, and margin dent

  • EPS fell from BDT 12.90 in Q1 FY22 to BDT 11.62 in Q1 FY23.

  • Gross margin fell by 44 bps while Opex/Sales rose by 190 bps in Q1 FY23.

  • Financial expenses increased to BDT 286 mn in Q1 FY23 driven by rise in outstanding loan balance and BDT depreciation.

IDLC Securities
15 November 2022
Published byIDLC Securities
  • EPS fell 9.9% yoy in Q1 FY23. EPS fell from BDT 12.90 in Q1 FY22 to BDT 11.62 in Q1 FY23. NPAT fell from BDT 1,382 mn in Q1 FY22 to BDT 1,245 mn in Q1 FY23. Major reasons for this decline include high financial expenses, rising operating costs and gross margin dent.

  • Consolidated sales grew 8.5% in Q1 FY23. RENATA’s revenue increased from BDT 7,718 mn in Q1 FY22 to BDT 8,371 mn in Q1 FY23. Its largest contributor to revenue, human health medicine sales rose c6% yoy, followed by animal health at c11% yoy growth, and contract manufacturing at c17% yoy growth. Note that its subsidiaries Purnava and Agro merged with the parent in FY22. They registered sales decline of c74% and sales growth of c603% respectively.

  • Gross margin fell by 44 bps while Opex/Sales rose by 190 bps in Q1 FY23. RENATA’s gross margin fell from c47.7% in Q1 FY22 to c47.2% in Q1 FY23. This is likely due to high commodity prices and BDT depreciation which has also negatively affected most of its peer companies’ margins. Opex/Sales rose from c23% in Q1 FY22 to c25% in Q1 FY23. This rise in operating expenses can be attributed to the inflationary pressure in the macroeconomy.

  • Financial expenses increased significantly in Q1 FY23. RENATA’s financial expenses increased from BDT 54 mn in Q1 FY22 to BDT 286 mn in Q1 FY23. There are two reasons for RENATA’s high finance expense. First, its outstanding loan balance grew c64% yoy to BDT 8,631 mn in September 2022. Second, it imports majority of its raw materials thus its BDT 495 mn trade payable in June 2022 is likely to be denominated in USD. The impact of currency depreciation likely led to exchange loss, further contributing to financial expenses.

  • Effective tax rate declined by 444 bps in Q1 FY23. RENATA paid an effective tax rate of c18% in Q1 FY23 against c22% in Q1 FY22.