Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hikal Ltd (BOM:524735, Financial) reported a significant revenue growth of 29% year-on-year for Q2 FY25, with EBITDA increasing by 30%.
- The company has successfully validated six products in its pharmaceutical division, with plans to validate more in the coming months.
- Hikal Ltd has improved its working capital and cash flow, reducing working capital by 50 crores.
- The pharmaceutical business showed strong performance with a 9% year-on-year revenue increase, driven by successful customer acquisition and increased demand.
- The company is well-positioned to capitalize on the China plus one strategy, particularly in the CDMO sector, with a healthy pipeline and technological advancements.
Negative Points
- The crop protection business experienced a 4% decline in value despite a 22% increase in volume, indicating pricing pressures.
- Finance costs and depreciation from recent asset additions impacted profit before and after tax.
- The crop protection sector is still facing challenges with excess inventory and is expected to take a few more quarters to stabilize.
- The company faces competition from China in the crop protection business, particularly in older generic molecules.
- Hikal Ltd's debt remains a concern, with a repayment of 130 crores expected next year, and ongoing investments in assets.
Q & A Highlights
Q: Can you explain the improved working capital and increasing cash flow?
A: We have put a lot of control on inventory and improved production processes, leading to a just-in-time approach for some products. This has resulted in a reduction of working capital by approximately 50 crore, which in turn has improved cash flow. - Unidentified_7
Q: The Pharma business has shown solid performance. Can we expect the same traction in H2 FY25?
A: The performance has been good, and we expect the momentum to continue in the second half of the year. There might be a slight dip in Q3, but we anticipate a bounce back in Q4, maintaining overall momentum. - Unidentified_3
Q: How should we look at the balance sheet shaping up in terms of debt?
A: Debt has come down compared to March, and we are in a comfortable position. We do not foresee any significant increase in debt by the end of March, even with continued investments in assets. - Unidentified_2
Q: What is the outlook for the crop protection business given the current market conditions?
A: Crop protection has seen a 4% decline in value but a 22% increase in volume. We expect stabilization in the industry, but positive growth momentum might take two to three more quarters. - Unidentified_2
Q: Regarding the Japanese CDMO market, why do Japanese innovators prefer sourcing N-1 and N-2 from India rather than the final API?
A: Japanese customers prefer buying N-1 due to their quality standards and cost structures, which allow them to perform the last step of crystallization in-house. This is not due to a lack of quality from Indian suppliers but rather their operational preferences. - Unidentified_2
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
