Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Increased market penetration and stable raw material prices in the current quarter.
- Significant rise in inquiries in the CDMO segment.
- Animal health facility completed validations for five products and initiated regulatory filings globally.
- Pharmaceutical business saw increased market demand and expanded customer base into new geographies.
- EBITDA growth of 16% year-on-year, reflecting improved operational efficiencies.
Negative Points
- Ongoing challenges and price pressure from competitors, particularly China, in the crop protection industry.
- Subdued demand in the crop protection business due to inventory correction and overcapacity.
- Increased depreciation and interest costs impacting profit before tax and profit after tax.
- Several CDMO project deliveries pushed back due to customer requirements.
- Interest costs increased due to capitalization of new assets, affecting profitability.
Q & A Highlights
Q: Could you clarify the timeline for improvement in the crop protection industry?
A: We expect improvement towards Q3 or Q4 of the current financial year, based on market interactions and customer feedback.
Q: What is the long-term growth outlook for Hikal Ltd over the next three to five years?
A: We anticipate a 10% to 15% growth starting from the next financial year, with historical EBITDA margins of 18% to 20% achievable from FY26 onwards.
Q: Why has the interest cost increased this quarter?
A: The increase is due to the capitalization of certain assets in the last financial year, which is now impacting the P&L. Debt has actually decreased this quarter.
Q: What is driving the increased EBIT margins in the crop protection segment despite industry challenges?
A: Higher-margin products from the CDMO space sold in Q1 contributed to the improved margins. However, margins may fluctuate in the coming quarters.
Q: What is the potential revenue for the animal health division over the next few years?
A: We expect the animal health business to reach INR300 crore to INR400 crore in revenue over the next three to four years, driven by product validations and new customer engagements.
Q: How long does it take for a CDMO inquiry to reach commercialization?
A: It can take two to three years or more, depending on the stage of development and the scale of initial quantities.
Q: Can you maintain Q1 margins for the crop protection segment on a full-year basis?
A: There will be some variation, but margins should become more sustainable once demand returns in Q4.
Q: What is the capacity utilization for the pharma and crop protection segments?
A: Crop protection is at about 60% due to demand contraction, while pharma is at 65% due to annual shutdowns and de-bottlenecking, expected to increase in Q2.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
