Europe, though a small contributor to revenues (8 per cent), posted 48 per cent YoY growth (up 3 per cent sequentially). New product launches, volume traction, and the favourable currency movement were the key drivers.
The PSAI (pharmaceuticals services and active ingredients) segment (contributing a fifth of revenues) posted record growth of 88 per cent YoY. Active ingredients' sales remained strong and realisations, too, surged. This also pushed up gross margin, say analysts, which at 56 per cent was significantly better than 51.7 per cent a year ago.
Thus, Q1 revenues grew 51 per cent YoY; the operating profit at Rs 1,162 crore was up 16 per cent YoY (versus consensus estimate of Rs 901 crore) and the profit-before-tax was up 3 per cent to Rs 879 crore (against the estimate of Rs 667 crore).
Ranvir Singh, analyst at Sunidhi Securities, expects the contribution of the PSAI segment to be better in the September quarter, too. By that time, US growth and India sales will also normalise. Hence, analysts maintain a positive view on the stock.
The company, at present, is focusing on specialty and limited competition products in the US. High focus on India and the acquired portfolio from Wockhardt, along with cost controls, are likely to drive earnings. Analysts at Motilal Oswal Financial Services expect 27 per cent growth in FY21 earnings. For the stock trading at 21 times trailing earnings, the valuation looks reasonable.