Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Morepen Laboratories Ltd (BOM:500288, Financial) reported the highest ever EBITDA in the last 40 years.
- The company successfully completed a QIP, raising INR200 crores for capacity expansion.
- Institutional holding increased significantly from 3-4% to 10.61%, attracting major global investors.
- The company is debt-free and has shown substantial growth in EBITDA margins, up 93% year-over-year.
- Medical devices business grew by 20%, contributing to a 14% overall revenue increase.
Negative Points
- Profit after tax was slightly lower due to tax liabilities, missing the highest-ever mark by INR1-1.5 crores.
- The company faced technical issues during the earnings call, causing interruptions.
- There was a 33% drop in the US market for API exports in the first quarter.
- India market exposure for APIs was reduced by 16% due to lower yields.
- The company does not provide specific future guidance, which may leave investors uncertain about exact future performance.
Q & A Highlights
Q: Congratulations on the good set of numbers. And I just had one question regarding the EBITDA margin. So on a blended basis, what will be the EBITDA margin going ahead?
A: Purva, we do not, of course, give overall specific guidance, but as I shared that with the increased investment in backward integration and with better buying power of the raw materials and, of course, a lot of investment in R&D, our EBITDA margins are expected to go 3% to 4% over a period of next two to three years and now this year, for example, is around 12%. So we are expecting it to go to 15%, but I'm not saying in next quarter or next year. So this is a process and a journey and we are not allowed to speak much on the future projection, but I'm giving you that, okay, this is how the trend is expected to be. And we are seeing the past trend from last year around 7.89%, we're moving to 12%. So there's a substantial increase in EBITDA margins.
Q: Another question was on the capex side. So what is the capex outlay going ahead, like, as you raise the QIP? So what will be the capex outlay and how it will be going?
A: As, Purva, you may already might have seen in the presentation, so 61% of the money, around INR123 crores, is being used for the capex and out of which around INR75 crores is for the -- INR78 crores is for the APIs, for the increasing capacities of the APIs, from 400 KL to 600 KL. And then around INR43, INR40 crores is for the medical devices, where we are increasing capacity of the glucometer from 2.5 million to 5 million, glucose strips from 500 million to 700 million and BP monitor 1.2 million to 2.5 million and API capacity from 400 KL to 600 KL.
Q: Regarding the tax rate, sir. Can you just guide on the idea of tax rate, what will be the tax rate going forward?
A: Ajay, you can help that? Yes, Ajay, go ahead. Yes. I think tax rate currently, we are having around 26%, so we should be maintaining this much, because we'll be doing capex next year, so that effect will come in, say, '25, '26. So more or less whatever tax rate is coming, that will be maintaining.
Q: In last previous quarter, you have mentioned that one of our competitors is exiting about the Indian market. Any update about that, sir?
A: Competitor is exiting? Yes, Sunil, in medical devices, in glucometer line, we had told that there is no official news about it, but Roche has upfolded its sales team into their diabetic team. It's the media news. And certainly, they are in an attempt to only focus on the distribution of the strips and meters to a distributor, and they are trying to reduce the focus on the sales team, and that's only a media news. So I do not have any official confirmation from them, but yes, that's what is our reality. But in the market, we know that we are getting more and more shares, and the competition is really -- the main competition is really, really noticeable.
Q: Since we have so much in cash in hand right now, are we looking for any acquisitions in the upcoming quarter?
A: Certainly, as per the QIP plan purposed, we do not have any immediate plan because the money has been raised for the capex and of course for the working capital. But that does not mean that we are not open for acquisitions. If we get a valid acquisition, it adds to our synergy and it adds to our strategy, so we certainly will be able to do that. But if it's an immediately on hand, we are evaluating multiple things, but certainly we have to see the cash surplus if we have surplus to acquire. But certainly, we have to come back to you in case we have some any bigger plans. But as on today, we are certainly looking for more of a capacity expansion. And if we get some readymade plants wherein which meets our standard and strategy, so we are open. But we do not have any big financial outlay plan for that out of the existing QIP.
Q: Any upcoming launch in the OT and finished product segment?
A: There are multiple launches, but I do not have any ready data with me. And of course, the major product in OTC, which we can talk, is we are launching a weight loss product. Weight loss and obesity is the biggest category these days globally and even more so in Europe and US India also is trying to copy. So we have a product coming from UK, which we have assigned a joint ventures and they will be supplying the basic ingredient and we will be doing the product distribution, marketing and everything in India. So this would be launched anywhere between September to October. We try to catch the festival season, but we are still at least a month, month and a half away. So that's a big thing for the weight loss category. Because most of the companies are focusing on the doctors' chamber and of course the products are very costly, semaglutide, liraglutide. So many products are being talked and there are injectables also. But we have seen the trend, the consumer still wants something at home in the comfort of home, which he can follow at peace. And according to his guidance, nobody wants to be treated by a doctor for weight loss. Weight loss is more of a lifestyle issue. So certainly, whenever we have an update, we'll come back to you. Thank you.
Q: Are you looking good segment in the device business? Since you said there's a market available for it in the international markets. So are we looking for any export in the device business?
A: In the international market, as we shared in the previous commentaries that we are looking for exports and certainly for export market, we have to develop large capacities and of course go for backward integration. So we are working on the backward integration. Of course, now not a part of this QIP, but in general, we are going for backward integration for the strip manufacturing. So of course, we are already doing most of the backward integration of the electronic part. But once we do that, so we'll have a large base for the capacity and we have already been in dialogue with Walmart, Walgreens and CVS of the world and I'm not saying any specific name, I'm just generally telling these broader names. And one of them has already visited our facility and they have started auditing the facility. One company from Korea has also done the audit of the
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
