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NEW DELHI : Syngene International Ltd reported strong 17% revenue growth for the September quarter. Most segments contributed to this growth. Key client markets in the US and Europe that are in process of returning to normal operations are helping the company’s discovery services segment. The segment demand is also being helped by newer services such as PROTACS and peptide synthesis. The biologics segment also continues contributing well to the growth, and the company said the client base in biologics manufacturing has also expanded. The company continued to manufacture remdesivir for covid-19 under a voluntary licensing agreement from Gilead though did not quantify the sales.

Overall, while the revenue growth impressed, there was some pressure on margins. Prudent cost management continues to help, and Ebitda has grown 12% year-on-year. However, higher raw material costs put pressure on Ebitda margins. Ebitda margins were down about 100 basis points (bps) to 31%.

The supply chain delays and increase in lead time for sourcing key raw materials have meant that the company has increased and advanced the stocking of key raw materials. The same is impacting margins and also working capital requirements. Analysts say the impact will continue until the supply chain issues normalize and may affect the margins for FY22, too.

The street also remains cautious and the stock has corrected by more than 7% since results last week. However, the medium-term outlook for the company remains intact say, analysts.

“Our preference for the franchise remains intact on the back of medium-term factors like the start of Mangalore API (active pharma ingredients), monetization of biologics capex (earlier than API)," said analysts at Yes Securities Ltd in their note.

The investments on capacity expansions over the recent past are likely to accrue benefits. The Indian research services companies and manufacturers are also expected to benefit from global companies looking at reducing dependence on China.

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