İŞ INVESTMENT – Vakifbank VAKBN TI Company Report 2Q16 – 19.08.2016
Fixed Income / Corporate Bonds
Successful set of 1H16 results. Deva disclosed TL370.2mn revenues in 1H16 up by 26% YoY driven by increased sales volume in both human pharma and veterinary products, the introduction of new generic products, and the increase in sales prices. In 1H16 human pharma revenue increased by 25% from TL 274.8mn in 1H15 to TL343.4mn. Veterinary business revenue increased by 32.5% YoY reaching TL 20.91mn in 1H16.
Deva sold a total of 75.08mn boxes in 1H16 up 10.53% compared to 1H15. 11 products namely Depores, Amoklavin, Devit, Cefaks, Dilatrend, Dodex, Dikloron, Respiro, Candexil Plus, Biteral and Encef made 50% of the Holding’s revenue in 1H16. Similar to 1Q16 in 2Q16, the Holding continued to increase its sales volume particularly in its vitamin, inhaler and ophthalmology products and maintained the 2nd position in terms of products’ volume sold with 6.3% market share according to IMS data. Moreover, Deva introduced 9 new products in 1H16, which contributed positively to the revenues. With the adjustments in the reference pricing system during 2015 and the upward revision in the EUR/TL exchange rate in the last quarter of 2015 and in February this year, the Holding managed to have a price increase around 8.5% in 1H16.
The share of exports increased slightly and made up 6.4% of total sales as of 1H16. The Holding started exporting to Germany in 2Q16 and obtained new licenses in other countries it has already been operating.
Improved margins in a difficult market. Gross profit margin went up from 41% in 1H15 to 43% in 1H16 thanks to continuing cost control, optimization in raw material procurements and the improvement in USD/TL exchange rate in the first half of the year. The Holding reported TL83.8mn EBITDA in 1H16, up 43% YoY, registering an EBITDA margin of 19% compared favorably with 16% in 1H15. Opex increase was limited, up 15.1% YoY to TL87.5mn in 1H16 from TL76mn in 1H15, despite the increase in minimum wages and increased R&D costs related to certain project write-offs.
Remarkable increase in net income. Deva recorded TL41.9mn net income in 1H16, up by 48% YoY despite slightly increased financial expenses. The Holding’s net interest expenses were up to TL25.3mn in 1H16 versus TL21.1mn in 1H15. Nonetheless, the Holding was able to carry the strong increase in its operating performance to the bottom-line.
Free cash flow (FCF) went to positive territory in 1H16 at TL17.3mn. versus -TL8.8mn in 1H15. Despite higher R&D related investments and increased working capital needs in 1H16, higher EBITDA resulted in an improvement in FCF. Cash and cash equivalents as of 1H16 was at TL36.4mn. Note that although the Holding’s R&D efforts continue, the majority of the heavy capex investments have been completed. The Holding will mainly invest for maintenance and R&D going forward.
With the issuance of the new 2-yr corporate note in June, Deva continued to extend its maturity profile. As of June-end, total debt was at TL439.1mn, which consisted of TL195.3mn short-term debt and TL210.3mn long-term debt. Deva improved the maturity profile of its financial debt via long-term bank loans in 1Q16 and the issuance of a new TL100mn corporate note in 2Q16. Net Debt/EBITDA went down to 2.2x in 1H16 from 3.1x in 1H15. The ratio improved on higher EBITDA generation compared to 1H15.