Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vimta Labs Ltd (BOM:524394, Financial) reported a 3% sequential growth in revenue, reaching INR824 million, driven primarily by pharmaceutical services.
- The company successfully completed a US FDA remote audit with no observations, enhancing its credibility in clinical research studies.
- Received grants in aid of INR40.9 million from the Ministry of Food Processing Industries for upgrading food testing laboratories, which will boost the food division.
- Plans to double capacity at the Genome Valley, Hyderabad campus, adding 200,000 square feet of additional space for labs and support functions.
- Maintained EBITDA margin at 30.6%, up by 50 basis points YoY, despite a marginal dip in revenue, showcasing better operating efficiencies.
Negative Points
- Revenue from operations for Q1 FY25 stood at INR818 million, a slight decrease from INR835 million in Q1 FY24.
- The company has faced capacity constraints for over a year, impacting its ability to grow revenue significantly.
- Despite new capacity coming online in Q2 FY25, the company expects only a gradual ramp-up, with utilization rates around 20-30% initially.
- The electronics testing segment has not yet reached its projected revenue potential of INR25-30 crores.
- The company has been experiencing flat revenue growth over the past eight quarters, primarily due to capacity constraints and strategic refocusing.
Q & A Highlights
Q: Why has Vimta Labs' revenue growth been flat over the past eight quarters?
A: Harita Vasireddi, Managing Director, explained that the primary reason for the flat revenue growth is capacity constraints, which have been an issue for about 18 months. Additionally, the company has been refocusing its services, primarily pushing pharma, food, and electronics, while defocusing on other services.
Q: With the new capacity coming online in Q2 FY25, can Vimta Labs achieve a quarterly run rate of INR95-100 crores by Q4 FY25?
A: Harita Vasireddi expressed optimism, stating that the company hopes to see a step-up in Q2 and achieve those numbers by Q4. The new facility will provide additional space, allowing for growth.
Q: What is the growth outlook for the electric and electronic testing segment?
A: Harita Vasireddi mentioned that the company is adding another EMI/EMC testing chamber, which will be operational by late Q4 FY25. This addition is expected to enhance the scope of services and address more products in the market.
Q: How is the food segment performing, and what is the outlook?
A: Harita Vasireddi noted that the food segment is faring better compared to last year, with no current headwinds. The government is increasing its surveillance, which will benefit private testing labs. The segment is stable, with typical seasonal trends.
Q: What is the planned CapEx for FY25, and how will it be allocated?
A: D.R. Narahai Naidu, CFO, stated that the CapEx for FY25 is INR70-100 crores, primarily for operating CapEx, including equipment and instruments. The majority will go into pharma and food, with 10-15% allocated to food.
Q: What is the expected utilization rate for the new facility in FY25?
A: Harita Vasireddi estimated that the utilization rate for the new facility would be around 20-30% in the first year, with potential for higher utilization as the company adds more business.
Q: What is the potential revenue from the JNPT lab?
A: Harita Vasireddi could not disclose specific revenue figures due to confidentiality agreements but mentioned that the company is in ongoing discussions to increase sample volumes.
Q: How is Vimta Labs managing its focus on margins despite flat revenue?
A: Harita Vasireddi explained that the company has been critically reviewing and optimizing its service portfolio, focusing on high-margin services and improving operational efficiencies to maintain stable margins.
Q: What is the company's strategy for expanding its electronic testing capabilities?
A: Harita Vasireddi mentioned that the next EMI/EMC chamber might be added in a different city, with Pune and Bangalore being considered as potential locations.
Q: How will the new clinical trial services impact Vimta Labs' margins?
A: D.R. Narahai Naidu stated that the margins for clinical trial services are expected to be in line with the company's existing margins, with efforts ongoing to improve overall margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
