Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ajanta Pharma Ltd (BOM:532331, Financial) reported a 12% year-on-year growth in total revenue, reaching INR1,145 crores.
- The branded generics business saw a healthy growth of 17%, contributing significantly to the overall revenue.
- EBITDA margins expanded to 29%, reflecting operational excellence and efficiency.
- The company achieved a cash conversion ratio of 141%, indicating strong cash flow management.
- Ajanta Pharma Ltd (BOM:532331) launched nine new products in Q1 FY 2025, contributing to future growth potential.
Negative Points
- The Africa institution business experienced a sharp degrowth of 36% due to preponement of supplies in Q4 FY 2024.
- Personnel costs increased by 33%, partly due to a one-time charge for a change in gratuity policy.
- Gross margins, although improved, are expected to remain volatile due to changes in product mix and higher contributions from lower-margin businesses.
- The US generics business posted only a 7% growth, aligning with mid-single-digit guidance, indicating slower growth compared to other segments.
- Freight costs are expected to adversely impact the company by INR30 crores on an annualized basis.
Q & A Highlights
Q: Sir, my first question is with the Africa branded generics business. What is the kind of revenue run rate we should see in this particular segment?
A: Historically, our average run rate was around INR155 crores to INR160 crores. We are looking to post a mid-double-digit growth across India and international markets, including Asia and Africa.
Q: Can you highlight some measures taken to improve working capital?
A: We focused on reducing inventory levels and improving receivables, especially in the US. This is reflected in our cash accruals.
Q: Why is the gross margin guidance conservative at 75% to 76%?
A: The contribution of branded generics may reduce with higher contributions from the US or Institution business. Additionally, expenses are expected to elevate in the next three quarters, impacting EBITDA.
Q: Can you explain the one-time charge in employee expenses?
A: The one-time charge of about INR30 crores is due to a change in the gratuity policy, removing the cap of INR20,00,000. This will normalize in subsequent quarters.
Q: How do you see the price erosion in the US market?
A: Price erosion remains stable in the high-single digits. The market seems to have stabilized quite well.
Q: What is driving the growth in the branded generics markets in Africa and Asia?
A: Growth is driven by increased market share from existing products, new product launches, and the addition of sales personnel. There is not a significant price increase in these markets.
Q: How do you plan to sustain growth in the India business given the growing competitiveness?
A: We are focusing on increasing productivity per representative and are constantly evaluating opportunities for strategic additions in MR counts and potential acquisitions.
Q: How much of your sales are hedged for currency movements?
A: Currently, we are hedged for about six months of sales. Depending on the currency outlook, we may extend this to nine or ten months.
Q: What is your capacity utilization across plants?
A: Our capacity utilization is about 60% to 65% across the plants.
Q: What is the PCPM (Per Capita Per Month) for your India business currently?
A: For the end of the first quarter, PCPM has touched INR400,000, up from INR350,000 in FY24.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
