Beximco Pharmaceuticals Ltd. :BXP-GB: Earnings Analysis: Q2, 2017 By the Numbers : January 30, 2017

Beximco Pharmaceuticals Ltd. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of GBP 39.67 million, Net Earnings of GBP 6.14 million.
  • Gross margins widened from 44.07% to 45.50% compared to the same period last year, operating (EBITDA) margins now 27.38% from 27.52%.
  • Change in operating cash flow of -14.52% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2015-09-30 2015-06-30 2015-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 39.67 36.59 28.29 27.06 25.54
Revenue Growth (%YOY) 55.35 52.29 23.13 29.27 27.92
Earnings (mil) 6.14 5 3.51 5.01 3.47
Earnings Growth (%YOY) 77.14 63.49 4.86 66.71 35.59
Net Margin (%) 15.47 13.68 12.42 18.53 13.57
EPS 0.02 0.01 0.01 0.01 0.01
Return on Equity (%) 10.27 9.58 7.76 11.13 7.78
Return on Assets (%) 7.69 7.07 5.57 7.99 5.61

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, BXP-GB‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if BXP-GB‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 8.42% and earnings by 22.67% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 44.07% to 45.50%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BXP-GB‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 134.65, compared to last year’s level of 106.48 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

BXP-GB‘s year-on-year change in operating cash flow of -14.52% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 21.20% to 22.36% and (2) one-time items. The company’s pretax margins are now 19.52% compared to 17.12% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Beximco Pharmaceuticals Ltd. is engaged in manufacturing and marketing of generic pharmaceuticals formulation products including life saving intravenous fluids, therapeutic nutrition products and active pharmaceutical ingredients. Its products include analgesics, anti-infectives, cardiovascular, intravenous fluids, central nervous system, gastrointestinal, respiratory, dermatology, muscloskeletal and ophthalmics. The company was founded in 1976 and is headquartered in Dhaka, Bangladesh.

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