Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Solara Active Pharma Sciences Ltd (BOM:541540, Financial) achieved a gross margin of 50.5%, marking a historical high with a 620 basis point improvement year-on-year.
- The company's EBITDA grew by 46% quarter-on-quarter and 61% year-on-year, reflecting a strong financial recovery.
- Revenues from regulated markets now constitute 76% of the business, indicating a strategic focus on stable and profitable markets.
- The company has successfully reduced operational costs significantly without compromising on quality compliance.
- Solara Active Pharma Sciences Ltd (BOM:541540) has received significant quality approvals for its plants and R&D center, enhancing its operational credibility.
Negative Points
- The company is still in the process of retrofitting its Vizag plant, which has impacted capacity utilization.
- There is a dependency on Ibuprofen, which constitutes 25% of the company's global revenues, posing a risk if market dynamics change.
- The CRAMS business, while growing, is still suboptimal and contributes less than INR100 crores annually.
- The company has a significant amount of debt, with plans to become net cash positive only by FY27.
- Solara Active Pharma Sciences Ltd (BOM:541540) is not focusing on filing many new DMFs, which could limit future growth opportunities.
Q & A Highlights
Q: Can you explain the jump in gross margin from 44.5% to 50.5% despite stable regulated market share?
A: The increase in gross margin is due to our focus on cost containment and higher CRAMS business. We have also focused on more profitable products and niche small volume products at higher margins.
Q: What is the outlook for revenue growth, especially with the Vizag facility coming online?
A: We expect the Vizag facility to be fully operational for three quarters in FY26, contributing significantly to revenue. We have guided for a Q4 exit run rate of INR400 crores, and we will provide more guidance for FY26 in Q4.
Q: How many DMF filings are you targeting annually?
A: We are focusing on improving the cost of existing DMFs rather than filing new ones. We plan to file about four to five new DMFs annually, focusing on commercializing our existing portfolio.
Q: What is the contribution of CRAMS to your revenue, and what is the target for FY26?
A: CRAMS currently contributes less than INR100 crores annually, about 7% to 8% of our revenue. We are on track to achieve a 10% contribution by FY26.
Q: What are the changes that have led to the company's turnaround in the last few quarters?
A: The turnaround is primarily due to heightened governance, focusing on profitable revenues, and cost optimization. We have a focused approach on cost improvement programs and have reset our business strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
