Capex is estimated at Rs7-8b for FY21.

Healthy traction in existing products and addition of in-licensed products facilitated robust growth in India/LATAM. However, the benefit was more than offset by intensified competition in key products in US generics. We maintain our EPS estimate for FY20/21/22.

While the US generics business has a strong ANDA pipeline and the DF/Europe/API outlook remains promising, the return ratios are yet to improve meaningfully. Maintain ‘Neutral’.  Sales were up 5.1% y-o-y at Rs26.4b (in-line), led by India (+18.2% y-o-y to Rs7.9b; 30% of sales) and LATAM (+54.1% y-o-y to Rs1.6b; 6% of sales) as well as API segment (+9.6% y-o-y to Rs2.6b; 10% of sales). RoW (12% of sales) was muted with 0.4% y-o-y growth to Rs3.4b. Europe sales declined 4% y-o-y to Rs3.1b (12% of sales) and US sales were down 6.5% y-o-y at Rs8b ($112.7m; 30% of sales). Gross margin shrank 80bp y-o-y to 64.9%. Ebitda margin contracted at a higher rate of 250bp y-o-y to 13% (our estimate: 14.7%), led by lower gross margin and higher staff cost/other expenses (+110bp/+70bp y-o-y). Ebitda declined ~12% y-o-y to Rs3.4b (our estimate: Rs3.9b). Adj. PAT came in line at Rs1.8b (-17% y-o-y).

GNP expects 10-15 ANDA approvals annually. Gross debt stands at Rs46.8b and net debt at Rs36.5b as of Dec’19. MR strength is at 3,800 and will remain in this range over 12-15 months. Capex is estimated at Rs7-8b for FY21. API has potential to deliver 13-15% CAGR over the next 3-5 years. India biz growth is expected to be 10-15% over the next 12-15 months. We expect 8% earnings CAGR over FY19-22, led by sales CAGR of 13.5% in India and 10% in API/LATAM/Europe.

We continue valuing GNP at 12x 12M forward earnings to arrive at a price target of Rs330 (prior: Rs341). Maintain ‘Neutral’ on limited upside from current levels.