Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 28% in Q1-FY25, driven mainly by exports.
- Agchem export revenue grew by 14%, with a 24% increase in volume for new products.
- Domestic revenue saw a strong growth of 39% year-on-year.
- Profit margins improved due to a favorable product mix and higher share of biological products.
- Cash flow from operating activities increased by 103% to INR 6,145 million.
Negative Points
- Profit after tax decreased by 17% to INR 4,488 million.
- Domestic revenue declined by 8% to INR 3,195 million.
- Pharma segment experienced a PBT loss of INR 70 crore due to deferred revenues.
- Effective tax rate increased to 20.7% from 14% in the previous year.
- Inventory levels remain high, impacting immediate business performance.
Q & A Highlights
Q: Margins have been strong this quarter at about 28%, despite a PBT loss in the Pharma segment. Should we expect these margins to sustain for the rest of the year?
A: Rajnish Sarna, Executive: Margins are linked to the product mix, which changes from quarter to quarter. We maintain our guidance of achieving 50-51% gross margin and 25-26% EBITDA margin for the year.
Q: Regarding the Pharma segment, is the deferment of revenues primarily from the Archimica business in Italy or CDMO shipments from Therachem in India?
A: Rajnish Sarna, Executive: It is a mix of both. The deferment is due to high inventory levels with customers, and we are reviewing the ongoing schedule of supply. We will have better clarity by next quarter.
Q: What would the contribution from new products be in the CSM business this quarter as a percentage of revenues?
A: Rajnish Sarna, Executive: New products contributed more than 20% to the revenues.
Q: We are increasing our expected product launches to around 8-10 versus the typical 5-6. Will this be a mix of Agchem and Pharma?
A: Rajnish Sarna, Executive: Yes, this will be a mix of Agchem, electronics chemicals, and other specialty chemicals. Pharma will be included in the pharma business.
Q: On the gross margin expansion front, are the new products margin accretive?
A: Rajnish Sarna, Executive: Yes, the margin expansion is driven by both new CSM products and a favorable product mix in the domestic area, including biologicals.
Q: Given the deferment in Pharma revenues, what is the overall guidance for this financial year?
A: Rajnish Sarna, Executive: We are reviewing the inventory and order book position and will provide better clarity in the coming quarters.
Q: What is the CapEx expectation for this year, and is there a plan to augment new products with dedicated capacity?
A: Rajnish Sarna, Executive: We have a CapEx plan of INR 800-900 crores for this year. We are also optimizing capacity utilization and improving throughput, which helps in commercializing new products without heavy investment.
Q: How is the Pharma business progressing in terms of integration and achieving initial guidance?
A: Rajnish Sarna, Executive: We maintain a robust outlook. Integration, modernization, and building a differentiated model are progressing well. Temporary setbacks are expected, but the mid- to long-term outlook remains strong.
Q: Given the strong gross margin expansion this quarter, why are you maintaining a 50% gross margin guidance?
A: Rajnish Sarna, Executive: Margins are linked to the product mix, which changes quarter-on-quarter. We maintain our guidance of around 50-51% gross margin.
Q: What is the overall revenue guidance for FY25, given the first quarter numbers?
A: Rajnish Sarna, Executive: A lot will depend on how the domestic season pans out. The first quarter was impacted by delayed monsoons, but we expect positive momentum in the second quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
