Equity Analysis /

Square Pharmaceuticals: SQUARE PHARMA: 9M 18 earnings miss on slower top-line and higher selling/distribution expenses

    Waseem Khan
    Waseem Khan

    Equity Research Analyst, Financials, Consumer and Pharmaceuticals (Bangladesh)

    Tellimer Research
    30 April 2018
    Published byTellimer Research
    Slow Q3 (EPS +2% yoy) drags 9-month numbers: Square Pharmaceuticals reported 9M 18 EPS of BDT12.0, up 13% yoy but 7% below our forecast. The miss primarily stems from slower than expected Q3 revenue (up 4% yoy, 11% below forecast) and higher selling & distribution expenses (up 22% yoy, 19% higher than forecast). Our unchanged target price of BDT342/share (suggesting an ETR of 13% and hence a HOLD recommendation) implies a valuation of 19.9x P/E and 14.1x EV/EBITDA on 2018f. Square is our preferred pharmaceutical play in Bangladesh on account of its consistently strong margins, market leadership position (at c19% market share) and lean operations.