Equity Analysis /
Bangladesh

Beximco Pharmaceuticals: Q3 18/19 earnings up 24% yoy on strong sales; beat expectation by 9%

    Tanay Kumar Roy
    Tanay Kumar Roy

    Research Analyst

    IDLC Securities
    30 April 2019
    Published by

    Earnings grew by 24% yoy. EPS stood at BDT1.85 in Q3 18/19 (Jan-Mar), outperforming our expectation by 9%. Consolidated revenue growth exceeded our expectations by 13% with a surprising 36% yoy growth; 26% organic growth from strong domestic and export sales and 10% from the Nuvista acquisition. Bottom-line growth was a bit slower due to break-even operation by Nuvista, rising opex, and higher debt servicing costs, but still above expectation. 

    Reiterate Buy with an unchanged TP of BDT109; valuation is too cheap to ignore (ETR 37.9%). Beximco trades at 11.3x 2019f PE, 7.5x 2019f EV/EBITDA, 1.9x 2019f EV/Sales and appears significantly discounted considering 17% revenue CAGR and 18% NPAT CAGR in the next five years. We think the return potential fairly compensates the profitability and governance concerns of the company. 

    Strong growth in international sales, thanks to the continuous increase in products. Exports grew by 100% yoy due to regular product launches and business expansion in the US market. In July 2018, Beximco launched its 4th product – Metformin Hydrochloride (diabetes drug), with a market size of USD456mn, which we think played a pivotal role in export growth. On 24 April 2019, Beximco got ANDA for its 15th product in the US market named Cyproheptadine – an antihistamine tablet with USD16mn market size. Prior to that, Beximco made a contact with Sandoz (Novartis) on 20 February 2019 to buy eight ANDAs.

    QoQ improvement in liquidity. Working capital cycle reduced to 183 days (-35 days yoy) driven by improvement throughout all parameters- inventory (-13 days yoy), receivables (-9 days yoy).and payables (+13 days).