Release Date: May 21, 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 strong EBITDA margin improvement, reaching 31.1% in Q4 FY24, up by 353 basis points sequentially.
- The company maintained a net debt-free balance sheet with cash and cash equivalents of INR258 million.
- Vimta Labs Ltd (BOM:524394) is nearing the completion of its new life sciences expansion project at Genome Valley, which is expected to contribute significantly to future growth.
- The company has initiated long-term partnerships with leading global pharmaceutical and animal health companies, which are expected to drive future growth.
- The food testing segment showed a decent rebound in the second half of FY24 due to improved supply chain and increased focus on food safety by the Indian government.
Negative Points
- Revenues from operations for FY24 remained flat at INR3,183 million compared to FY23.
- Profit after tax in FY24 decreased to INR410 million from INR482 million in FY23, reflecting a decline in PAT margin to 12.7%.
- The start of the new pharma facility was delayed by a couple of months, pushing the expected commercial operations to Q2 FY25.
- The company faced challenges in the clinical research segment due to geopolitical issues and economic slowdowns, impacting pharmaceutical testing.
- Vimta Labs Ltd (BOM:524394) had to retrench some of its diagnostic expansion, reducing the number of labs from 19 to 17, indicating challenges in scaling this segment.
Q & A Highlights
Q: With regards to the CapEx on the pharma side, when could this facility start commercial operations?
A: The starting got delayed by a couple of months. We will be ready to move into the new facility early June. Commercial operations could start in full-fledged by Q2.
Q: What gives you confidence in achieving the INR500 crores revenue goal by FY26 despite a flat FY23?
A: The confidence comes from our visibility of how our partnerships are scaling up on the pharma side and new services added during the previous financial year. Pharmaceuticals will continue to be a major growth driver, along with food and electronics.
Q: Are there certain big clients who have given assurances for large volume businesses once the lab starts?
A: These don't come in the form of assurance. It depends on how well we service them. We have initiated relationships with large companies, and it takes time to build proof of concepts and meet compliance expectations.
Q: Do we need any further large CapEx to achieve the INR500 crores revenue target?
A: CapEx will be a continuous requirement. Typically, our CapEx is equivalent to the depreciation amount in our P&L. Over and above that, we spend where more capacities are needed or new capabilities require special technologies.
Q: Can you elaborate on the clinical trials segment and its growth potential?
A: Clinical trials were difficult to do in Hyderabad a decade back, but the environment has improved. We won our first contract late last quarter. These projects are large in value and can be a strong revenue stream once we establish ourselves as a reliable partner.
Q: Are we seeing more traction in food testing due to increased focus on food safety?
A: Yes, the regulators have stepped up vigilance, especially on spices. We see increased sample inflows in those areas.
Q: What is the timeline to scale up the new pharma facility and its peak revenue potential?
A: Our revenue guidance of INR500 crores by FY26 factors in the new facility capacity. With the addition, we may achieve revenue levels of around INR600 crores to INR700 crores when we occupy the full capacity.
Q: Who are your nearest competitors, and is Eurofins present in India as a competitor?
A: We have different competitors for different service segments. Eurofins is a competitor in preclinical and food testing. Other competitors include SGS, Intertek, and Wipro in various segments.
Q: Is there a threat that pharma companies might shift lab work in-house as they grow?
A: It's a common threat in any business. However, our integrated pharmaceutical services and culture of quality and excellence are our USPs.
Q: Will the new clinical trials business impact margins initially?
A: This year, it will break even. We have already set up the team, so there will be no adverse impact on margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
