Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Suven Pharmaceuticals Ltd (BOM:543064, Financial) reported a healthy inflow of RFQs, driven by consistent efforts from the management, commercial team, and R&D.
- The company has secured RFQs from new customers across the US, Europe, and Japan, broadening its customer reach.
- Gross margins improved by 157 basis points year on year, driven by an improved business mix.
- The company generated a free cash flow of INR33 crores in Q1 FY25.
- Suven Pharmaceuticals Ltd (BOM:543064) expects growth in the second half of FY25, driven by increased shipment schedules and demand recovery in the AgChem segment.
Negative Points
- Overall revenue declined by 34% year on year.
- The AgChem segment experienced slower-than-expected demand recovery.
- Q2 is expected to see muted growth, with significant improvements anticipated only in the second half of FY25.
- The company incurred a one-time cost of INR35.7 million related to ESOP, impacting EBITDA margins.
- Working capital days increased to 127 days due to delays in receipt of supplies, though this normalized by July 31.
Q & A Highlights
Q: What steps are we taking to convert the increased RFQs into confirmed orders? Are there any challenges you foresee in the process? What is the long-term vision for the new agrochemical SBU? And how does it fit into Suven's overall growth strategy?
A: (Managing Director, Executive Director) We have strengthened our back-end team on project proposal making and created dedicated teams to respond on time. We also engage in mutual conversations with customers to get feedback before decisions are made. For the agrochemical SBU, we have separated it out to stay relevant to our customers and invest in continuous improvement and efficiency, securing future growth.
Q: Is there some seasonality in Cohance's business that makes Q1 generally softer, or is there margin pressure?
A: (Managing Director, Executive Director) The Q1 performance is in line with our plan, and we do not expect any full-year basis impact. The business mix changes quarter-on-quarter, and the CDMO mix is expected to improve towards the latter part of the year.
Q: What synergies do you foresee from the Sapala Organics acquisition, and how will it be integrated? What factors are driving the surge in RFQs?
A: (Managing Director, Executive Director) The cross-pollination of customers is a key synergy. The surge in RFQs is driven by an increase in global clinical trials, geopolitical sentiment favoring India, and our internal efforts to increase commercial and business development activities.
Q: Can you share more perspective on the kind of projects that are driving growth in H2?
A: (Managing Director, Executive Director) Growth in H2 will be driven by a combination of commercial projects, reloads, and new RFQs. We have purchase orders in hand for existing products, and our ability to deliver gives us confidence in H2 growth.
Q: What is the timeline from RFQ to getting firm orders at an industry level?
A: (Managing Director, Executive Director) Early phase RFQs can take four to six weeks, mid-phase six to eight weeks, and late-phase eight to twelve weeks. We expect to see some decisions on RFQs and orders by the next quarter.
Q: What gives you confidence that the agri side will recover in the second half?
A: (Managing Director, Executive Director) We see positive signs from our customers and the market. The destocking process is nearing completion, and demand is expected to improve, driven by macro changes and customer growth.
Q: Do you expect growth for the full year in the combined pharma plus agri business, excluding Cohance?
A: (Managing Director, Executive Director) Overall, Suven's CDMO business is expected to grow by the end of the full year.
Q: What are the categories in RFQs that are expanding to the commercialization stage?
A: (Managing Director, Executive Director) Predominantly oncology and orphan drug products, with some products having Fast Track approval. We are also starting to get RFQs in other categories, but it is too early to comment.
Q: Are there any other acquisitions in the pipeline?
A: (Managing Director, Executive Director) We are looking at unique technology platforms that can accelerate growth and keep us relevant to our customers. We have strengthened our M&A team and will communicate specific investments when they materialize.
Q: Will the pro forma entity have growth in top line and EBITDA for the full year?
A: (Managing Director, Executive Director) Yes, we expect growth in both revenue and EBITDA for the full year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
