Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Caplin Point Laboratories Ltd (BOM:524742, Financial) reported a 17% growth in revenue and a 20% growth in PAT for Q1 FY25.
- The company achieved a gross margin increase from 55% to 59.6%, reflecting improved profitability.
- Caplin Steriles contributed 16% to the revenue, up from 11% last year, indicating strong performance in high-margin segments.
- The company has a robust cash reserve of INR 960 crores and total liquid assets of INR 1,850 crores, ensuring financial stability.
- Caplin Point Laboratories Ltd (BOM:524742) is expanding its product portfolio with 24 ANDAs and plans to launch 30+ products in the U.S. market within the next 12 to 15 months.
Negative Points
- Revenue from Caplin Steriles decreased from INR 100 crores last quarter to INR 80 crores this quarter, indicating potential volatility in this segment.
- Standalone business growth has been muted, with a top-line CAGR of nearly 3% over the last five years, raising concerns about scalability.
- The effective tax rate increased to more than 19% this quarter, compared to 18% last year, potentially impacting net profitability.
- The company faces challenges in the registration process in Mexico, which could delay business expansion in this market.
- Significant increase in other expenses, from INR 55 crores in Q1 FY24 to INR 82 crores in Q1 FY25, could affect overall profitability.
Q & A Highlights
Q: Can you provide some insight into the factors that contributed to the decrease in revenue for Caplin Steriles from INR100 crores last quarter to INR80 crores in this quarter? Additionally, can you share expectations of growth guidance for Caplin Steriles in FY25 over FY24?
A: There might be some confusion; we've actually increased our revenue by almost 70% from last year. However, comparing quarter-on-quarter, the second half of the year is typically larger. We are confident we will beat last year's numbers comfortably. More than the top line, our focus is on distributing our products and outsourcing others, which will contribute to our business.
Q: Why has the standalone business been muted this quarter, both in terms of top line and bottom line on a year-on-year basis?
A: The priority for us is cash flow and profit. We have been creating a cash flow of INR300 crores annually after completing projects. The standalone business is not the right measure to evaluate us because our distribution and high-growth entities are through subsidiaries. The consolidated business is a better barometer.
Q: What is the expected tax rate for the full year, given that this quarter's tax rate is more than 19%?
A: The effective tax rate will hover around 20% on a consolidated basis. Last year, it was 18% due to deferred taxes from units making losses. Now, with profits, the effective tax rate is higher.
Q: Can you share the gross margin and EBITDA margin for Caplin Steriles?
A: The EBITDA for Caplin Steriles for this quarter ended June 2024 is INR19.3 crores. The gross margin is around 55%, but EBITDA is a better tracking number due to the combination of sales and service income.
Q: What is the progress on the Mexico business, both in terms of registration and front-end?
A: Registration is in progress, and it takes a long time. We are confident of completing 20-30 product registrations in the next year. Business will start in bits and pieces, and we expect significant progress in 1-2 years.
Q: What is the total CapEx amount going towards our API facility?
A: We are targeting around INR20 crores for our Vizag facility and INR60-70 crores for our oncology API facility. We have already spent close to INR40 crores on Vizag.
Q: Do you see any headwinds that may prevent us from achieving our targets for this year?
A: We will continue to achieve our targets. Every challenge presents an opportunity. For example, logistical issues can create opportunities to sell more goods at higher prices. We will not let crises go to waste.
Q: Can you explain our front-end plans for the U.S.A. and how they compare with larger generic players out of India?
A: We are targeting smaller accounts and noncompliance areas not covered by large players. We will outsource products from quality-conscious companies to expand our offering. We will not chase top line at the expense of margins.
Q: What is the number of products registered in Mexico and Chile, and how many have been launched?
A: In Chile, we have around 72 products registered and have started our warehouse recently. In Mexico, we have around 8-9 products registered and have launched a couple. We plan to launch more once we have a substantial portfolio.
Q: What is the reason for the sharp increase in other expenses this quarter?
A: The increase is due to filing ANDAs, migrating to CIF for optimal freight rates, and market promotion expenses. Despite the increase, our EBITDA margin has improved from 31% to 32%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
