Release Date: February 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shaily Engineering Plastics Ltd (BOM:501423, Financial) reported a robust top-line growth of 15% to INR158 crores on a consolidated basis for Q3 FY24.
- The company improved its gross margins to 43.9% and EBITDA margins to 20.8% for the quarter.
- The Healthcare division signed four additional contracts for the development and supply of Pen injectors with large pharma companies.
- Exports during nine months FY24 stood at 74.2% of total revenue, indicating strong international demand.
- The company has a healthy pipeline for Teriparatide and GLP-1, with significant revenue contributions expected from devices where it owns the IP over the next 24 to 36 months.
Negative Points
- Machine utilization rate was relatively low at 38% in Q3 FY24 and 40% in nine months FY24.
- Revenue for nine months FY24 remained flat at INR473.3 crores compared to INR472.6 crores during nine months FY23.
- The company faces challenges in the macro environment, including issues with shipping containers and rising freight costs.
- The toy business is not being actively pursued due to lack of customer stickiness and sustainability concerns.
- The company has put a temporary hold on hiring a CEO after two unsuccessful attempts, which could impact leadership and strategic direction.
Q & A Highlights
Q: How should we understand the margin profile? Is it the benefit of raw materials or more of the mix shifting towards pharma?
A: The margin profile is a combination of higher revenue from pharma, including platform access fees charged to customers, contributing to the improvement in margin. Some of our pharma income is back-ended, expected to be prominent in Q3 and Q4.
Q: Can you explain platform access fees and quantify the amount for the quarter?
A: Platform access fees are charged to customers for accessing the platform, helping with dossier filing, validation, and testing protocols. The difference between stand-alone and consolidated results reflects these fees. The number varies quarterly but should be constant annually for the next couple of years.
Q: Can you provide specifics on the $50 billion opportunity in semaglutide and auto-injectors?
A: Shaily is the only spring-driven solution matching the innovator's device for semaglutide, likely capturing around 70% of the generic share. Supplies will start in 2026 for ROW markets and 2029-2030 for the US. For auto-injectors, we are in the final development stage for tirzepatide, with market launch expected around 2034-2035.
Q: What is the performance of the pharma segment for the nine months?
A: We don't disclose individual revenues, but Q3 pharma revenues are higher than Q2. We refrain from sharing specific growth numbers for the nine months.
Q: When will the new pharma facility be operational, and what is the maximum revenue potential?
A: The new pharma facility was operationalized at the end of Q2. We expect revenue potential to be 2.25 to 2.5 times the capital investment at full capacity.
Q: What kind of manufacturing growth can we expect for FY25 based on current supply schedules?
A: We expect growth next year across various segments, including home furnishings, appliances, automotive, FMCG, and healthcare. We don't want to specify a percentage but anticipate decent market growth.
Q: What is the expected revenue and EBITDA from pharma platform monetization for FY24?
A: Q4 will be similar to Q3 in terms of Shaily Innovations UK. We see a good pipeline for the next two years, with revenue recognized over a 12-15 month period.
Q: What is the steady-state EBITDA margin we should expect going forward?
A: We don't provide margin guidance but expect EBITDA margins and ROCE to improve over the next two years, driven by higher realization medical devices and improved utilization across facilities.
Q: What is the export target split going forward?
A: As healthcare business builds up, domestic revenue will increase, but the business will still be tilted towards exports. We don't foresee substantial changes in the next couple of years.
Q: How was the response to our devices at Pharmapack?
A: The response was phenomenal, with a packed schedule over two days. We will provide a detailed update in the next earnings call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
