Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NGL Fine-Chem Ltd (BOM:524774, Financial) reported a year-on-year revenue increase of 16.6%, reaching 93.4 crores.
- The company is witnessing a strong recovery from China, which has positively impacted overall performance.
- NGL Fine-Chem Ltd received an additional certificate of suitability for a new project, expanding its portfolio for the European market.
- The company has four drug master files approved for the European markets and plans to submit four additional filings by the end of the financial year.
- Capital expenditure plans are on track, with phase one expected to be completed by the fourth quarter of this financial year.
Negative Points
- EBITDA margin declined to 12.36% from 17.4% in the previous year, indicating pressure from increased competition and lower prices.
- Profit after tax decreased by 6.35% year-on-year, attributed to soft demand from the European market and currency challenges in Africa, Latin America, and Turkey.
- Geopolitical tensions in the Middle East and elevated logistics costs have affected supply chain efficiency.
- The operating environment remains challenging with high supply levels and subdued demand.
- The company is operating at 90-95% capacity utilization, which may limit growth until new capacity comes online.
Q & A Highlights
Q: Can you discuss the current operating environment and the improvement in gross margins this quarter? Also, what caused the sharp increase in employee costs?
A: The operating environment remains challenging with supply exceeding demand, leading to price pressures. However, we have maintained our market share, reflected in sales growth. Gross margins improved due to selective price increases for certain products. The employee cost increase was due to some one-time payments, and we expect it to return to traditional levels of 12-13%.
Q: With the current capacity utilization at 90-95%, how do you plan to meet demand until the new plant is operational?
A: We are exploring inorganic opportunities to acquire a ready plant to commence production within 6-8 months. Additionally, we are considering outsourcing part of our production to meet demand. We are actively looking at a combination of these options to ensure customer demand is met.
Q: How has increased competition affected your product strategy and margins?
A: Increased competition has led to margin compression due to more companies entering the veterinary market. The supply has grown faster than demand, creating pressure on margins. We expect margins to recover as the supply-demand equilibrium is restored. The competition is more intense in smaller molecules, but we are focusing on moving up the value chain to more regulated markets.
Q: What is the revenue potential from new registrations in Europe, and how do margins compare to current business?
A: We are targeting revenues of about 150 crores over the next 3-4 years from the European market. The EBITDA margins from this business should be roughly double what we are currently achieving.
Q: Are you considering entering the CDMO space given the current market dynamics?
A: Currently, we are not exploring the CDMO space. Our priority is to operationalize the new plant, complete registrations, and fill capacity. CDMO is something we may explore in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
