Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Neuland Laboratories Ltd (BOM:524558, Financial) reported a 30.8% increase in total income for FY24, reaching INR1,571.1 crores compared to INR1,200.9 crores in FY23.
- The company's EBITDA for FY24 stood at INR474.5 crores with a margin of 13.2%, reflecting a 6.8% increase over the previous year.
- The CMS business contributed close to 50% of the company's revenues, showing robust growth as key commercial products continue to scale.
- Neuland Laboratories Ltd (BOM:524558) reduced its net debt position to negative INR32.6 crores and improved its working capital cycle to 122 days from 141 days.
- The company has been actively investing in long-term growth CapEx, with INR143.7 crores invested during FY24, and continues to upgrade its facilities.
Negative Points
- The total income for Q4 FY24 was INR390.4 crores, a decrease from INR415.1 crores in Q4 FY23.
- EBITDA for Q4 FY24 was INR112.2 crores with a margin of 28.7%, a decrease of 2.02% compared to Q4 FY23.
- Profit after tax for Q4 FY24 was INR67.6 crores, down from INR84.5 crores in Q4 FY23.
- The company expects FY25 to be a year of normalized revenue and margin due to ongoing investments and input cost increases.
- There is a potential for moderation in revenue growth and normalization of margins in the short run due to the investments being made in the business.
Q & A Highlights
Q: My first question is on our product pipeline. There's a great jump in the Phase 2 molecule pipeline this year. Can you share some color on that? Additionally, the total number of projects or molecules have not grown much from FY20 to FY24. Can you please throw some light on this?
A: (Saharsh Davuluri, Vice Chairman and MD) The near-term pipeline, especially the molecules contributing significantly, continues to do well. We are seeing a steady inflow of new projects. The increase in new projects is not as high as two years ago, partly due to the biotech funding crunch. However, we are seeing a steady increase in new opportunities and RFPs. The team is also becoming more selective in soliciting high-value projects.
Q: Given the biotech funding pressure and the BioSecure bill, don't you think these factors will add to the revenue for FY25 and push it further?
A: (Saharsh Davuluri, Vice Chairman and MD) Our estimates for FY25 are based on concrete order books and visibility. The growth achieved in FY23 and FY24 was due to new projects added in FY19 and FY20. Any surge in new projects due to biotech funding will likely impact the business two to three years down the line, not immediately in FY25.
Q: Can you provide insights into the revenue segment, particularly the mix between high-margin specialty and low-margin prime? Also, will the improvement in working capital continue?
A: (Saharsh Davuluri, Vice Chairman and MD) There has been a steady increase in the contribution of specialty vis-a-vis Prime. It's hard to predict if this will continue or stabilize. Regarding working capital, our target is 120 days, and we are confident we can achieve that. The slight drop this quarter is likely connected to the quarter itself.
Q: On the quarterly results, operating expenses have increased significantly. Is there any one-off, or is it due to investments?
A: (Abhijit Majumdar, CFO) Operating expenses have increased as per our plans, mainly due to manpower costs and professional fees. This increase is in line with our expectations and actuals.
Q: Can you provide an update on the additional land purchased next to Unit 1? Will we start investing in it now?
A: (Sucheth Davuluri, Vice Chairman and CEO) The land was procured for future expansion based on our five-year plan. We are adding capacity in line with projections and needs.
Q: What is the CapEx guidance for FY25 and FY26?
A: (Abhijit Majumdar, CFO) The baseline CapEx will be INR100-plus crores, but we will be opportunistic. If we find something that meets our growth plans, we will inform the stock exchange accordingly.
Q: Can you provide some key milestones to look forward to in fiscal '25 and '26?
A: (Saharsh Davuluri, Vice Chairman and MD) Over a four- to five-year period, we target a 20% growth CAGR. FY25 will be a modest growth year, with better growth expected in FY26 and FY27. This outlook is based on our current pipeline and projections. Any new molecules or Phase III commercializations will enhance the business but are unlikely to impact FY25 significantly.
Q: Was there any comment on pricing or volume trends for the quarter, especially for the generics side?
A: (Saharsh Davuluri, Vice Chairman and MD) Prime products have inherent challenges, but we haven't faced any significant issues. Market share volatility and new regulations have affected some Prime products, but there are no long-term impacts. The business segments continue to be healthy.
Q: Can you provide an update on the peptide level, particularly the filing of molecules in CY24 and CY26?
A: (Saharsh Davuluri, Vice Chairman and MD) We have two active GDS projects: difelikefalin, expected to file DMF later this year, and a GLP-1 expected to file in 2026. Both projects are progressing well, but it's premature to factor in financial impacts until commercialization indications are clear.
Q: What is the current status of the BioSecure law, and what will be its impact on the company?
A: (Saharsh Davuluri, Vice Chairman and MD) The BioSecure law is still under discussion. While the narrative is favorable, we need to see if it translates into actual business. We are seeing increased RFI and RFP activity, but it's too early to predict the impact.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
