1. Retain ‘buy’ on Syngene, growth momentum to continue: Jefferies

Retain ‘buy’ on Syngene, growth momentum to continue: Jefferies

Syngene reported a strong quarter with revenue growth ahead of expectation at 31% led by development and biologics discovery services.

By: | Published: April 29, 2016 5:22 AM

Syngene reported a strong quarter with revenue growth ahead of expectation at 31% led by development and biologics discovery services. Margins though saw a dip in the quarter due to increased employee cost. We expect the growth momentum to sustain and company to report 24% EPS CAGR over FY16-18. Syngene remains one of the few companies without any regulatory overhang. Retain buy.

Syngene reported results broadly inline with expectations. The key positive was revenue growth which at 31% was ahead of expectations. Management indicated that this was driven by strong growth across business especially development and manufacturing. Among discovery services, biologics has seen a strong growth and is gaining traction.

Margins in the quarter declined 200bps y-o-y and were 150bps below expectation. This was driven by higher employee cost. Management indicated that this was partly due to provision for bonuses in the quarter. Further, the number of scientists employed increased 15% q-o-q as phase I of the new R&D centre has now come online. We expect the margins to normalise over the coming quarters.

Management commentary on growth ahead was positive and it reaffirmed FY18 guidance of $250 million revenues.

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