Syngene Q1 Results Review - Healthy Guidance Already Priced In: Yes Securities

Yes Securities Report

Syngene International Ltd.'s Q1 FY24 benefited from strong traction in core business led by development and manufacturing along with contribution from Zoetis supplies and healthy forex tailwind YoY.

Margin came in at 28% (excluding hedging loss Rs 155 million), tad below our 29% estimate as mix skew towards development/manufacturing would have led to higher overheads.

Syngene International's management reiterated FY24 guidance and hinted at some mix change (presumably more of development and biologics manufacturing).

Factoring ~$45 million of Zoetis sales in FY24 leads us to believe core research business is not growing more than 12-13% over corresponding ex-Zoetis base of FY23.

Moreover, given that manufacturing share is likely to increase (biologics plus Mangalore active pharma ingredient), cost overheads would preclude operating leverage benefits in the immediate term which makes us cautious.

Given that numbers especially margin was largely in line, do not see any need to tweak estimates in a meaningful way.

Retain 'Sell' with unchanged target price Rs 560 as operating leverage is still unlikely in the current fiscal.

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