Renata declared EPS BDT 12.7 in Q3 FY21 against BDT 11.0 in Q3 FY20, implying c16% yoy earnings growth. During 9M FY21 EPS stood at BDT 37.33 against BDT 31.36, implying c19% yoy earnings growth. Both Q3 and 9M figures are in line with our expectations.
Net revenue remained almost flat on a yoy basis. Gross revenue in human pharmaceuticals generated c10% yoy, offset by c5% yoy dent in animal health and c49% yoy dent in contract manufacturing. On the 9M basis, gross revenue growth in human pharmaceuticals, animal health and contract manufacturing business stood at c10%, c6% and c13% respectively.
Please note that the decline in the contract manufacturing business in Q3 FY21 was preceded by a c83% growth in 1H FY21. The quarterly fluctuation in revenue in contract manufacturing seems due to the nature of the business as the 13% revenue growth on the 9M basis seems modest.
Costs trimmed down on yoy basis, leading to the earnings growth. We observe two major yoy changes in the cost structure - BDT425mn (+c14%) yoy increase in the cost of goods sold and BDT552mn (+c30%) yoy decline in operating expenses. We think this massive change in cost structure could be due to changes in accounting and cost recognition policy. COGS and Opex together declined by BDT127mn (-c3%) yoy, suggesting to be the major reason for BDT170mn (c16% yoy) earnings growth. Also, a decline in finance expenses by BDT27mn due to lower debt balance aided in earnings growth.
Working capital requirement increased by c18 days yoy to 88 days. The main reason is an increase in inventory. We think a slow topliner in Q3 FY21 and maintaining additional raw materials inventory to minimize supply chain-related uncertainty amid the pandemic are the main reasons for inventory build-up.