Given its significant operating leverage, a pick-up in revenue growth can deliver significant earning upsides and trigger a re-rating. Maintain Outperformer, with a target price of R210 (10x FY16E). In Q1FY15, revenues grew by 18% y-o-y to R3.63 billion (above our estimate of R3.5 billion), aided by strong sales in CRAMS (+41% y-o-y) and Solvay Vitamin (+49% y-o-y). Carbogen Amcis (+3% y-o-y) and MM (+4% y-o-y) sales were below estimates.
Ebitda margins, at 20.8%, were below our estimate of 24%, led by lower margins in the Carbogen business (12.6%, down 90bp q-o-q). Margins of Solvay Vitamin witnessed a sharp 1,200bp y-o-y improvement to 27%. Ebitda declined by 25% y-o-y to R752 million, which is below our estimate of R845 million.
The tax rate came in lower, at 17%, versus our estimate of 22%. Resultant, PAT came in at R238 million, versus our estimate of R304 million. Key positives: Strong Solvay Vitamin sales and margins; lower tax rate. Key negatives: Weak Carbogen sales and margins. Impact on financials: We have increased our FY15/16E earnings by 3-5% to factor in higher margins of the Solvay Vitamin business.