Release Date: August 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Divi's Laboratories Ltd (BOM:532488, Financial) reported a consolidated revenue of INR2,197 crores for Q1 FY25, marking an 18% year-on-year growth.
- The company achieved a PBT of INR604 crores and a PAT of INR430 crores for the quarter, showing significant improvement from the previous year.
- Divi's Laboratories Ltd (BOM:532488) successfully completed a US FDA inspection at its Unit-II production facility with only one procedural observation.
- The company is experiencing stable demand for its established generics and gaining market share in emerging generic products.
- Divi's Laboratories Ltd (BOM:532488) is advancing its custom synthesis segment with several new projects across all clinical stages, including Phase 2 and Phase 3 molecules.
Negative Points
- The company is facing pricing pressure across its large volume products like Naproxen, Gabapentin, and Dextromethorphan.
- Logistics and supply chain challenges persist, resulting in significant rate hikes and long transit times.
- The nutraceutical business showed no growth in Q1 FY25 compared to the same quarter last year, with revenue remaining flat at INR178 crores.
- Divi's Laboratories Ltd (BOM:532488) has a ForEx loss of INR1 crore for the quarter, compared to a gain of INR3 crores in the corresponding quarter of the previous year.
- The company is cautious about the impact of ongoing geopolitical events and the potential volatility in raw material prices.
Q & A Highlights
Q: How has the API pricing environment been, given the price deflation in many products?
A: We are experiencing pricing pressure across large volume products like Naproxen, Gabapentin, and Dextromethorphan. However, due to our position as a major producer and our long-term contracts, we are maintaining and even growing our market share. We expect prices to stabilize in the near future. β Kiran Divi, CEO
Q: Can you provide an update on the custom synthesis business and its growth prospects?
A: We have several molecules in Phase II and Phase III, and we are producing large volumes for brand companies. Our sales have been positive, and we see growth opportunities in both volumes and new projects. β Kiran Divi, CEO
Q: What is the progress on the contrast media side, and how is it impacting growth?
A: We are working on iodine-based compounds for CT scans and Gadolinium compounds for MRIs. We have been shipping commercial quantities to brand companies and seeing considerable growth in volumes. β Kiran Divi, CEO
Q: How are logistics and supply chain challenges affecting your operations?
A: We are facing challenges similar to the industry, but we are planning well in advance and implementing risk mitigation measures to ensure operational continuity and customer satisfaction. β Nilima Divi, Whole-Time Director (Commercial)
Q: Can you elaborate on the peptide business and your investments in this area?
A: Initially, we were manufacturing protected amino acids. Now, we are working on peptide fragments for GLP-1 and GLP-2 compounds. We have set up a pilot plant and ordered commercial-scale reactors to meet the growing demand. β Kiran Divi, CEO
Q: What is the impact of the BIOSECURE Act on your business?
A: The BIOSECURE Act is bringing more Phase II and Phase III molecules our way, especially in custom synthesis. We are seeing increased interest from brand companies and expect this trend to continue. β Kiran Divi, CEO
Q: How are you managing the financial performance and growth in the nutraceutical segment?
A: The nutraceutical business is stable, and we expect double-digit growth over the year. Quarterly fluctuations are normal, and we focus on year-on-year performance. β Nilima Divi, Whole-Time Director (Commercial)
Q: What are your CapEx plans for the next two years?
A: We will provide more guidance in the next quarter. Currently, we are focused on completing existing projects like Kakinada and some custom synthesis projects. Maintenance CapEx is expected to be around INR250-300 crores. β Kiran Divi, CEO
Q: How do you see the profitability and asset turnover in the custom synthesis segment?
A: In the long term, we expect an asset turnover of 1:1. Currently, it is around 0.6-0.7, but with new projects and expansions, we aim to reach this target in the next two to three years. β Nilima Divi, Whole-Time Director (Commercial)
Q: What is the status of the Kakinada plant, and when will it be operational?
A: The Kakinada plant will be ready for commercialization by the end of FY24-25. However, it will take another two years to see the full benefits due to regulatory approvals and product validations. β Nilima Divi, Whole-Time Director (Commercial)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
