Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue from operations increased by 22% year on year to INR164 crores due to higher volume growth of key APIs.
- Gross margins remain strong at 35%, primarily due to lower raw material prices and improved product mix.
- EBITDA margin improved to 20%, up by 104 bps from a year ago and 670 bps higher sequentially.
- PAT for the quarter was INR16.48 crores, up by 76% year on year, primarily due to higher EBITDA and lower financial costs.
- The company is on track to complete the backward integration of key intermediates by the first half of FY25 and increase production capacity by the end of Q4 FY25.
Negative Points
- Sequential revenue from operations was lower by 33% due to seasonality.
- Ibuprofen margins are on the lower side due to it being a commoditized product.
- The company faces competition from two major competitors in India, which could impact market share.
- The CapEx for the CRO business is still in preliminary stages, with no detailed plans provided yet.
- Dependency on Chinese suppliers for raw materials poses a risk, although efforts are being made to reduce this dependency through backward integration.
Q & A Highlights
Q: My question was regarding the ibuprofen business. Who are our major competitors and where are they located? And can you quantify as to how much cost competitive can we be against the competition?
A: There are two major competitors operating out of India, one from South India and another from the northern part of India. We are improving our cost on our ibuprofen product and expect to be one of the most cost-competitive products in the market in the next one to two quarters.
Q: We are doing a INR150 crore CapEx for backward integration. Can you quantify how much gain in EBITDA can we see from this CapEx?
A: The growth in EBITDA margin by 20% is mostly attributed to this backward integration project. Our sale prices are remaining stable, and once we reduce our raw materials through vertical integration, this margin will directly add to our EBITDA.
Q: Is there any plan to merge the associate company VKT Pharma with our company?
A: No, there are no plans to merge VKT Pharma with our company.
Q: What is our ibuprofen and non-ibuprofen mix in the Vizag facility?
A: Approximately around 3,000 kilometers of production capacity, with 1,500 kilometers dedicated to ibuprofen. Key therapeutic areas for non-ibuprofen include antidiabetic and anti-retroviral products.
Q: What percentage of our sales came from the US regulated market this quarter?
A: This quarter, the majority of our sales were in the antidiabetic segment, dominated by Europe. We expect a combination of both US and Europe regulated markets going forward.
Q: How many of our products are backward integrated to the key KSM level?
A: Around five to six products are backward integrated to the key KSM stage.
Q: Can you indicate the volume shift sequentially for ibuprofen?
A: We are currently doing close to 350 tons per month, up from the previous range of 150 to 200 tons per month.
Q: Can you give a brief about the new products you plan to add in the next 12 to 18 months?
A: While we cannot disclose specific product names due to confidentiality, most new products will be in existing therapeutic areas.
Q: How do you plan to manage rising costs and maintain profit margins going forward?
A: Major revenue drivers include existing products like antidiabetic and ERD products, and ibuprofen. We are adding more customers and new registrations. The INR150 crore CapEx, with INR70 crore for backward integration, aims to reduce dependency on Chinese suppliers and improve EBITDA margins.
Q: How many steps backward are you integrating for the two products, and what is the commercial benefit?
A: We are planning to do around eight stages in-house for sitagliptin. While we cannot quantify the exact commercial benefit, this backward integration will help grow our EBITDA margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
