Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eris Lifesciences Ltd (BOM:540596, Financial) achieved a consolidated revenue of INR 720 crores for Q1 FY25, representing a 54% growth year-on-year.
- The company reported a consolidated EBITDA of INR 250 crores for the quarter, reflecting a 47% increase year-on-year.
- The gross margin for the base business improved by nearly 300 basis points to 86% year-on-year.
- The company successfully integrated the Biocon acquisitions ahead of schedule, realizing significant synergies.
- Eris Lifesciences Ltd (BOM:540596) has evolved its business model from a specialty to a specialty plus super specialty model, adding segments like oncology, critical care, and nephrology.
Negative Points
- The cardiac portfolio has been underperforming compared to the IPFs, with challenges in stock availability affecting market performance.
- The gross margin for the consolidated business decreased by more than 800 basis points due to changes in business and product mix.
- The company has a significant net debt of INR 2,700 crores as of June 30, 2024.
- There was a reduction in fixed costs as a percentage of revenue by 660 basis points, but this was offset by a gross margin reduction.
- The effective tax rate for the year is expected to be around 25%, higher than the cash tax rate of 17%.
Q & A Highlights
Q: The cardiac portfolio has been underperforming in recent years. Has this trend continued, and what initiatives are being taken to get this segment back on track?
A: Yes, the cardiac portfolio has been underperforming, but we are seeing improvements. We faced stock shortages due to the generalization of a key product, but we expect to hit market numbers by next quarter and surpass them by Q3. We have two solid product launches in cardiology lined up for Q2.
Q: The guidance for depreciation was revised from INR285 crore to INR305 crore. What accounts for this difference?
A: The revision is due to actual accruals in Q1, which were higher than our initial estimates. We have annualized these figures to provide the updated guidance.
Q: Can you provide the clean base of FY24 for the base business in terms of revenue and EBITDA?
A: The clean base revenue is around INR1850 crores, with an EBITDA margin of 37%. The margin expansion will be driven by productivity gains, gross margin improvements, and fixed cost synergies.
Q: What is the current status and future outlook for the Swiss Parenterals business?
A: Swiss Parenterals reported Q1 revenue of INR73 crores. We expect a revenue of INR330 crores for the year with an EBITDA of INR115 crores. The business is focusing on regulatory inspections, expanding the product pipeline, and building a base for accelerated growth in export markets.
Q: What prompted the acquisition of the Bhopal manufacturing site, and how does it fit into your strategy?
A: The acquisition was driven by the need for additional capacity to meet the growing demand for insulins and to improve gross margins and supply chain control. The site will also enable us to realize our biotech division and get GLP ready.
Q: What is the expected tax rate for the full year, and how will it evolve in the coming years?
A: We expect an annual tax rate of about 25% for this year. As we shift more manufacturing in-house and utilize the new Bhopal site, we anticipate the tax rate to gradually decrease by 2% each year, reaching around 18% in the next three to four years.
Q: What are the future growth prospects and margin expectations for the Biocon-2 segment?
A: We are guiding for a 28% EBITDA margin for the Biocon-2 segment this year, with an overall 33% margin for both Biocon segments combined. We expect further margin improvements as the new plant becomes fully operational.
Q: How do you see the overall growth and margin profile of the consolidated business over the next three years?
A: We are better prepared for growth and margin expansion due to our shift from specialty to super specialty segments. While it's difficult to quantify exact figures, we expect to significantly outperform the market, driven by strong growth in the insulin and critical care segments, as well as new product launches in cardiology.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
