Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- J.B. Chemicals & Pharmaceuticals Ltd (BOM:506943, Financial) reported a robust first quarter with quarterly sales crossing INR1,000 crore for the first time.
- The company achieved a 12% year-on-year increase in revenue, reaching INR1,004 crore.
- Operating EBITDA excluding non-cash ESOP costs increased by 20% year-on-year to INR292 crore.
- The domestic business showed strong traction with a revenue of INR595 crore, up 22% year-on-year.
- The company reduced its debt by INR249 crore in Q1 FY25, strengthening its net cash position.
Negative Points
- The international business remained flat, generating revenues of INR409 crore.
- The CDMO segment experienced a moderated quarter due to a muted cough and cold season, with revenues at INR106 crore.
- Freight costs continue to be higher, impacted by geopolitical issues.
- The South Africa business has been underperforming, requiring a haircut of around INR150 crore over the last five quarters.
- Despite strong performance, the company maintains a conservative EBITDA margin guidance of 26% to 28% due to ongoing logistical and material availability issues.
Q & A Highlights
Q: Can you share the overall growth of the domestic ophthalmic portfolio on a YoY basis and your key learnings and challenges from the integration?
A: The ophthalmic business has shown positive growth, with annualized sales expected to reach INR180 crore this financial year, up from INR160 crore last year. Key learnings include the importance of reenergizing brand assets and increasing field force size, which has led to positive traction in secondary demand.
Q: Do you maintain your guidance for double-digit growth for the CDMO business despite a muted start?
A: Yes, we expect the CDMO business to pick up from September onwards, driven by new projects and a robust order book for Q3 and Q4. We should be able to deliver double-digit growth by the end of the year.
Q: Can you split the 12% growth in the India business between volume, price, and new launches?
A: The 12% growth comprises 4% volume growth, 6% from price increases, and 2% from new introductions. Key brands like Cilacar and Razel have shown significant volume growth, contributing to this overall performance.
Q: What is driving the strong gross margin performance despite the dilutive impact of the Novartis ophthalmic acquisition?
A: The improvement in gross margins to 66.2% is driven by a better product mix, strong performance in the Russia business, and cost optimization efforts. Despite the dilutive impact of the ophthalmic portfolio, we have maintained high gross margins.
Q: Given the strong Q1 EBITDA margins of 29%, do you think the operating margin guidance of 26% to 28% is conservative?
A: While we have delivered strong margins in Q1, we maintain our guidance of 26% to 28% due to potential fluctuations in the acute portfolio and ongoing logistic and material availability issues. However, we expect to be on the higher side of this guidance.
Q: Are you still evaluating acquisitions in the domestic market?
A: Yes, we continue to evaluate potential acquisitions, focusing on brands and midsize companies that align with our strategic goals. This is an ongoing process within the company.
Q: How is the ranitidine and metronidazole market performing, and what is driving their growth?
A: Both markets are growing well, with J.B. Chemicals holding significant market shares. Metronidazole has shown strong volume growth despite subdued demand last year, and ranitidine has maintained steady demand. Incremental innovations and lifecycle management are key drivers.
Q: What is the current monthly sales run rate for Azmarda, and how is the competitive scenario?
A: Azmarda has achieved a steady-state demand of 120,000 to 125,000 units per month. The market has consolidated, with competition now limited to 4-5 key players. We expect double-digit volume growth going forward.
Q: What was the primary reason behind the improvement in EBITDA margins?
A: The improvement in EBITDA margins is primarily due to better control over overheads and marketing spend, contributing to a 130 basis point improvement. Additionally, gross margin improvements from better price mix and cost of goods sold (COGS) benefits added 80 basis points.
Q: What are your plans for new launches, and which areas will they focus on?
A: We plan to launch new products in pediatrics, GI, and probiotics, leveraging our existing franchises. Recent launches include a topical application for the Metrogyl franchise and new products in the Sporlac franchise. We aim to introduce one or two new products every two months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
