Q2 FY21 earnings growth stood at c12% yoy. EPS of the company stood at BDT 4.9 (NPAT BDT 154mn) in Q2 FY21 against BDT 4.4 (NPAT BDT 138mn) in Q2 FY20, implying c12% yoy earnings growth. Please note that, on a standalone basis, IBNSIN reported c15% yoy growth in Q2 FY21. The earnings declined on a consolidated basis because of a negative contribution from the subsidiaries, which are yet to contribute to the top line. During 6M FY21, EPS stood at BDT 8.2 (NPAT BDT 256mn) against BDT 7.3 (NPAT BDT 228mn) in 6M FY20, implying c12% yoy earnings growth.
Earnings growth was mainly driven by c23% yoy revenue growth in Q2 FY21. The revenue base of the company stood at BDT 1,881mn in Q2 FY21 against BDT 1,534mn in Q2 FY20. During 6M FY21, revenue growth stood at c18% yoy. We think the revenue growth was driven by anti-ulcer product portfolio, especially by the brand Gavisol (antacid), which became popular as an inexpensive alternative of Reckitt Benckiser’s Gaviscon.
Higher opex and higher effective tax rate partially offset the benefit of the top-line growth. Opex/Sales of the company increased by 83bps yoy (from 28.1% in Q2 FY20 to 28.9% in Q2 FY21) mainly from the subsidiaries, which led to a decline in operating profit margin by 91bps yoy. At the same time, the effective tax rate of the company increased from 23.6% in Q2 FY20 to 26.2% in Q2 FY21 (+264bps). They partially offset the benefit of high revenue growth.
We continue Buy for IBNSIN (ETR 28.6%) with TP BDT 310. IBNSIN generated earnings CAGR of 29% during the past 5 years. We expect the company to expand its NPAT margin from 6.3% in FY20 to 8.4% in FY25 and generate c20% earnings CAGR during FY21-25. Our TP implies 17.9x FY22f PE, 12.4x FY22f EV/EBITDA, and 1.3x FY22f EV/Sales. IBNSIN is currently trading at 14.1x FY22f PE, 9.9x FY22 EV/EBITDA, 1.1x FY22f EV/Sales. Please note that IBNSIN’s current LTM PE stands at 17.9x, which is c35% lower than the historical median PE of 27.7x.