Zydus Lifesciences (ZYDUSLIFE) Q4 05/06 earnings summary

Executive summary

• FY 2005-06 standalone sales rose 16.3% to Rs. 13,082 mn; PAT increased 25.5% to Rs. 1,649 mn, led by domestic formulations and export growth.

• Consolidated gross sales reached Rs. 15,078 mn, up 15.5%; consolidated net profit rose 27% to Rs. 1,524 mn. Prior-year consolidated figures are not strictly comparable due to differing subsidiary reporting periods.

• International expansion, first-year U.S. profitability, contract manufacturing and NME pipeline progress advanced the strategy to build a global generics business and research-led healthcare operation.

Financial highlights

• Standalone sales Rs. 13,082 mn, +16.3%; PBIDT Rs. 2,820 mn, +17.7%; PBT Rs. 1,888 mn, +25.5%; PAT Rs. 1,649 mn, +25.5%.

• Standalone EPS was Rs. 26.26 after extraordinary items and Rs. 28.02 before; net sales were Rs. 12,460 mn after excise duty.

• Consolidated sales revenue increased 15.5% to Rs. 15.1 bn; PBIDT rose 18.6% to Rs. 2,913 mn and net profit grew 27% to Rs. 1,524 mn.

• Formulation exports grew 102.3% standalone; other operating income rose 20.4% to Rs. 377 mn, including Rs. 92 mn from global contract manufacturing.

• The 2004-05 export-incentive base included a one-time Rs. 69 mn DFCE benefit; 2005-06 incentives were Rs. 55 mn.

Outlook and guidance

• Long-term targets: top-ten global generics player with sales above $1 bn by 2010 and a global research-driven business by 2020.

• U.S. operations planned 10–12 additional product launches in 2006 and aimed to triple topline; pricing pressure was expected to continue.

• French operations were expected to grow above 20% annually, supported by a pure-generics focus, Evolupharm's pharmacy network and patent expiries.

• South Africa planned eight further launches in FY 2006-07; Taiwan revenue was expected to begin in FY 2006-07.

• Management planned continued investment in NME research, process and cost optimisation, regulated-market filings, and inorganic growth opportunities.