Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indoco Remedies Ltd (BOM:532612, Financial) reported strong growth in its largest brand, Cyclopam, with a 32% quarter-on-quarter increase and a 60% growth compared to the preceding quarter.
- The company received final ANDA approval from USFDA for pregabalin capsules and tentative approval for canagliflozin and metformin hydrochloride tablets.
- USFDA inspections at the API kilo manufacturing plant and Indoco analytical solutions public testing lab were completed with zero observations.
- New product launches such as FosHS for urinary tract infections, Hylupro, Britigan, Alerchek eye drops, Kidodent bubblegum mouthwash, and Calaid XT tablets were introduced.
- The company is undergoing a master manufacturing plan across all sites to improve efficiency, supported by automation and capacity increases.
Negative Points
- Net revenues for the first quarter decreased by 4.6% to INR 3,942 million compared to the same quarter last year.
- EBITDA to net sales for the quarter dropped to 13.1% from 15.2% in the same quarter last year.
- PAT to net sales for the quarter fell to 3.8% from 6.3% in the same quarter last year.
- The India business experienced slow revival in the anti-infective and respiratory portfolio, with negative growth in the Febrex Plus brand.
- Remediation efforts at the Goa Plant 2 impacted the optimal supply of products to the US market.
Q & A Highlights
Q: What is the growth outlook for your regulated markets, specifically Europe and USA for this year?
A: (Sundeep Bambolkar, Joint Managing Director) Our plants are under refurbishment, affecting product availability. We expect plant corrections to complete by Q2, with consistent supply from Q3.
A: (Aditi Panandikar, CEO) Over five years, we expect Europe to give a CAGR of close to 20% and the US around 30% from next year.
Q: Can you elaborate on the misses in the domestic brands for the first quarter?
A: (Aditi Panandikar, CEO) The decline is due to the launch of cosmetic variants of Sensodent K and KF through Warren Remedies, not reflected in Indoco's standalone results. Brands like Cyclopam, Cital, and Karvol Plus have shown significant growth. Febrex Plus is the only brand with negative growth, but we expect a revival in Q2.
Q: How do you see the cost structure and margins for the full year?
A: (Aditi Panandikar, CEO) Gross margins are affected by product composition and reduced US supply. We expect margins to normalize from Q3 with improved India business and US supplies. Other expenses are contained, but remediation costs and product returns have impacted this quarter.
Q: What is the status of the Goa Plant 2 remediation and US FDA inspection?
A: (Aditi Panandikar, CEO) We have committed timelines to the FDA for remediation, expected to complete by October. Post-remediation, we aim to supply products at full potential.
Q: Can you provide details on the API CapEx and its impact on revenues and margins?
A: (Aditi Panandikar, CEO) We have invested INR100 crore in API facilities through Warren Remedies, aiming to double our API business. Currently, 60% of API is for internal use, and we plan to sell 60% externally. Margins will improve after validation and approvals, expected in six to eight months.
Q: What is the growth expectation for the emerging markets business?
A: (Aditi Panandikar, CEO) We expect an 18% to 20% CAGR from the emerging markets over the next couple of years.
Q: Can you explain the decline in expenses and the impact of Sensodent K and KF investments?
A: (Aditi Panandikar, CEO) Expenses dropped due to better cost containment and the shift of Sensodent K and KF investments to Warren Remedies. We expect expenses to stabilize around INR120 crore per quarter.
Q: What is the outlook for the European market, considering the paracetamol challenge?
A: (Sundeep Bambolkar, Joint Managing Director) We have developed and filed new products for Europe. Paracetamol has bounced back, and we expect better results in Q2, Q3, and Q4, with growth in FY25.
Q: What is the expected peak debt and CapEx for the next three years?
A: (Pramod Ghorpade, CFO) We expect to borrow an additional INR100 crore for CapEx commitments. Current short-term debt is INR350 crore, and long-term debt is INR250 crore.
Q: How is the D2C oral care business shaping up, and what are the revenue expectations?
A: (Aditi Panandikar, CEO) The D2C oral care business is growing at 18% to 20%. We have invested INR100 crore in the Auric facility, and the two toothpaste variants have generated INR25 crore this quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
