Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The company reported a slight increase in exports for Q1 FY25, reaching INR150 crore compared to INR149 crore in the same period last year.
- India's economy has exceeded growth expectations, averaging 8.3% annual growth, which positively impacts the pharmaceutical sector.
- The company is focusing on expanding its non-ibuprofen API segment, targeting 50% of API revenue from non-ibuprofen products within the next three to four years.
- IOL Chemicals And Pharmaceuticals Ltd (BOM:524164, Financial) has received several CEP approvals, which are expected to boost export contributions in the coming quarters.
- The company is maintaining a strong cash position with INR190 crore in the bank, which is earmarked for business expansion and potential opportunities.
Negative Points
- Total income for Q1 FY25 declined to INR510 crore from INR570 crore in the same quarter last year.
- EBITDA for the quarter decreased to INR58 crore from INR80 crore in the corresponding quarter of FY24, with EBITDA margins dropping by 260 basis points.
- Net profit for Q1 FY25 fell to INR30 crore from INR46 crore in the same period last year.
- The company is facing challenges with the US FDA inspection delays, which is affecting approvals for 15 drugs.
- There has been a substantial decline in other expenses, primarily due to high coal prices and freight costs, which may not be sustainable in the long term.
Q & A Highlights
Q: We are getting many approvals from China and Europe, but not from the US. What is the reason behind that? Any inspection updates?
A: The US FDA inspection is due but not yet scheduled. They typically inform us only a day or two before the inspection. We have filed DMFs for 15 drugs, which may be approved at once when the inspection occurs. (Abhay Singh, Vice President, Company Secretary)
Q: Regarding EBITDA margins, management has been targeting 15% to 20%, but it hasn't been maintained. Why?
A: Volatility in raw material prices and significant price reductions in APIs like Paracetamol and Metformin have impacted margins. We expect margins to stabilize and improve within the next two quarters. (Rakesh Mahajan, Advisor Finance & Strategic)
Q: As an investor-friendly company, why haven't there been any bonuses, splits, or buybacks?
A: While we have cash, our priority is to enhance business and increase capacities. The Board will consider investor-friendly actions like bonuses or buybacks in the future. (Abhay Singh, Vice President, Company Secretary)
Q: What is the margin for our Chemical and other API divisions, and the ibuprofen division?
A: We do not disclose product-wise margins publicly. This can be discussed separately. (Rakesh Mahajan, Advisor Finance & Strategic)
Q: How do you see the competition ramping up in the ibuprofen market affecting the industry?
A: We are the largest player with backward integration and focus on quality and regulatory approvals. We do not expect further price reductions and are prepared to tackle competition. (Rakesh Mahajan, Advisor Finance & Strategic)
Q: Could you give a breakup of exports in Q1 FY24 versus this quarter?
A: This quarter, exports were 30% of total turnover, similar to last year. (Pardeep Khanna, Chief Financial Officer)
Q: Why has ibuprofen seen a lower decline in revenue compared to non-ibuprofen?
A: We are focusing on non-ibu business, but ibuprofen remains stable. We have added new products to our API portfolio, increasing non-ibu share. (Pardeep Khanna, Chief Financial Officer)
Q: This quarter saw a substantial decline in other expenses. Why, and will this be sustainable?
A: Last year's higher expenses were due to high coal prices and freight costs, which have now stabilized. We expect these expenses to be maintained at current levels. (Pardeep Khanna, Chief Financial Officer)
Q: Are we planning any acquisitions, and is that why we are saving money?
A: Our priority is organic growth, but we may consider acquisitions if beneficial opportunities arise. (Rakesh Mahajan, Advisor Finance & Strategic)
Q: What is the capacity utilization for ibuprofen and non-ibuprofen products?
A: Ibuprofen utilization is around 80%, and non-ibu ranges from 52% to 70%, averaging around 59% to 60%. (Rakesh Mahajan, Advisor Finance & Strategic)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
