Release Date: February 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Domestic formulation business delivered 11% growth for the quarter.
- Export generics business in the U.K. and other markets grew by 33%.
- EBITDA margin improved to 18.55% from 15.77% year-on-year.
- Material cost to sales ratio improved from 34.86% to 32.21%.
- Consolidated EBITDA margin increased by 1.12% during the quarter.
Negative Points
- Branded formulation business in ROW declined due to shipment issues in CIS and Myanmar.
- Institutional antimalarial business declined from INR 83 crores to INR 77 crores.
- API business saw a decline from INR 329 crores to INR 285 crores.
- Challenges in the branded market due to geopolitical issues and licensing delays.
- Freight and logistic costs remain a concern despite some moderation.
Q & A Highlights
Highlights from Ipca Laboratories Ltd (BOM:524494, Financial) Q3 FY '24 Earnings Call
Q: Now that we have had a full quarter with Unichem, what are your updated thoughts on synergies that we can generate in terms of quantitative synergies over the next 2 years? And what are the primary drivers that you see to generate those synergies?
A: We are working on market extensions, process improvements, and cost reductions. Unichem's productivity is improving, with a 40% growth in total income and a 43.6% increase in the top line this quarter. We expect to achieve INR 2,000 crore turnover and 15% EBITDA margin in the next 2 years. β Ajit Jain, CFO, Managing Director, Executive Director
Q: The generics business has seen a lot of growth, 33% year-on-year. Is there any one-off component? How should we look at that business next quarter and for the next year?
A: The generics business has consistently grown over the last 3 quarters. Europe and South Africa have shown significant growth, and we expect this trend to continue. We anticipate launching 8 to 9 products in the U.S. in the next 12 months, contributing to further growth. β Ajit Jain, CFO, Managing Director, Executive Director
Q: Can you provide an update on some of the new plant expansions, such as Dewas and Nagpur? How soon will these plants start contributing to your numbers?
A: Dewas is expected to start contributing in about 6 months with 5-6 product approvals. Nagpur's first intermediate planning is ongoing, primarily for captive consumption, which will reduce costs but not add to the top line immediately. β Ajit Jain, CFO, Managing Director, Executive Director
Q: On the U.S. products avenue, can you provide an incremental update on the potential upside and the number of products you will start shipping from Q1 FY '25 to the end of FY '25?
A: We plan to launch around 8 products in the next 12 months and 16-17 products over the next 2 years. This includes products with updated dossiers and new filings. β Ajit Jain, CFO, Managing Director, Executive Director
Q: How should we look at the branded market business from the next 2 to 3 quarters' perspective, given the challenges mentioned?
A: Despite challenges, we expect the branded market business to grow around 10% next financial year. Current year growth is projected at 8%. β Ajit Jain, CFO, Managing Director, Executive Director
Q: What is the margin profile excluding Unichem for this quarter? There seems to be a sequential decline. What is driving this?
A: Material cost to sales ratio has improved due to more value-added businesses. Personnel costs have increased due to field additions, but manufacturing and other expenses have remained stable. We expect margins to improve by around 2% in the next financial year. β Ajit Jain, CFO, Managing Director, Executive Director
Q: Can you provide an update on the performance of your group companies like Krebs, Lyka, and Makers Laboratories?
A: Makers is independent. Lyka is performing well with business growth and plant upgrades. Unichem has shown significant improvement, and Krebs is reducing losses with ongoing product validations. Onyx and Trophic Wellness are also performing well. β Ajit Jain, CFO, Managing Director, Executive Director
Q: What is your guidance for the international business, given the recent performance?
A: We are lowering expectations for API and international branded business but expect reasonable growth in the next financial year. Generic business will continue to grow, and U.S. business will add to this growth. β Harish Kamath, Corporate Counsel, Company Secretary, Compliance Officer
Q: What is the current MR productivity and your plan for any additions going ahead?
A: Current MR productivity is around INR 4,25,000 with approximately 7,000 medical reps. We plan to add up to 5% more field force. β Ajit Jain, CFO, Managing Director, Executive Director
Q: For the products to be launched in the U.S., will the sales be part of Unichem or the generic business?
A: Manufacturing will be done by Ipca and sold to Unichem U.S. Sales will be booked in both Ipca and Unichem's books, with Unichem's books consolidated with Ipca's. β Harish Kamath, Corporate Counsel, Company Secretary, Compliance Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
