IPCA LABS
Key Q1FY21 Earning Call Highlight -
ANALYST: MR. NITIN AGARWAL – DAM CAPITAL ADVISORS
LIMITED
MANAGEMENT: MR. A.K JAIN – JOINT MANAGING DIRECTOR – IPCA
LABORATORIES LIMITED
MR. HARISH KAMATH – CORPORATE COUNSEL & COMPANY
SECRETARY – IPCA LABORATORIES LIMITED
Some Q1FY22 Business Updates -
* The
domestic formulation business delivered 25% growth over previous year and excluding 54
Crores of domestic hydroxychloroquine, institutional business which we have done in last
year Q1, if we exclude that then domestic formulation business has grown by almost around
41% in Q1 on a lower base
* Our Pain segment has
given almost around 36% growth which contributes almost around 49% of our businesses
* Cardiovascular and
Antidiabetic has grown by almost around 14%, which contribute almost around 18% of the
business, Antibacterial has done really very well. The business from 18 Crores has gone to
almost around 50 Crores. It contributes around 8% of the business and overall growth in
this business segment has almost 173% for the quarter.
* Derma is another business where last year Q1 we were facing problems because of
lockdowns and other things that recovery has been very strong, the business last year was
almost around 13 Crores, that has gone to almost around 25 Crores and the business growth
has been almost around 89% and Derma contributes almost around 4% of the business.
Some Important Question-Answer -
Q1. The raw material cost, so how do you see the outlook
now for the coming next three months to six months whether the cost are stabilizing or
continue to rise?
Ans. Still continuing the rising trends are there, more particularly again the flood in China and lot
of other issues are still disturbing the markets for more particularly for the basic chemicals
and intermediates.
Q2. Impact of material prices?
Ans. A.K JAIN said that, if the prices increase then we also increase the price of our product at the time. So there is no impact of the price of material.
Q3. Views on API sales?
Ans. A.K JAIN said that we were expecting very,very significant decline in the domestic API, because of last year we had almost around 136 crore of API business which we have sold to API to an Indian comapny which in turn exported the product to US for covid. So thats why our API business do well in Q1 FY22
Q4. The gross
margins, so if I look at our mix it has not sequentially shifted much as we know the
domestic is still around 40% of our revenue but if we look at the gross margin, they have
compressed quite a lot on a sequential basis, so apart from higher raw material cost, are
there any other reasons for that?
Ans. Basically, there are the two reasons, one is let us say the product mix which is sold in this
particular quarter, as I told you that there are significant jump in some of the product
portfolios like Antibacterials, Antimalarials, cough and cold and all those kind of portfolio.
Traditionally, their margin levels are low. Their cost of manufacturing is higher and some
of the Antimalarials we have very, very low margins and their business growth has been
significant, so that also impacts, so we cannot see the pharma business sequentially, it has to
seen with reference to the quarter-on-quarter, you cannot see that. It has to be with reference to each quarter, product mix is little different, so that is one factor, of course the cost of
material also gone up but it is also the product mix which is also interacting overall on
material cost side and last year for Q1 if you look at most of those business relating to
Chloroquine, hydroxychloroquine which has happened that has happened at much, much
higher margin level and therefore the material cost was almost around 27% but if you look
at overall our material cost for whole of the year it was around 32% kind of material cost
and current in this quarter is for on 33%-33.4%, so it is little increase also is because of
overall product mix changes.
Q5. Next question is on India business, so you have
mentioned we have seen very good recovery in some of the segments, so just to understand
like most of these are seasonal in nature, so how do you see India growth panning out in
next few quarters?
Ans. As I have already indicated that yes there was some impact of COVID also in that because
there was 4 Crores hospitalized patients and therefore there is a sharp recovery in antibacterial but the anti-bacterial sales happens very good in the rainy season because lot of
infection happens around that time. Q1 is one where the slow infection are at lower level
but this year, it has also helped by the overall those kind of infection there and overall let us
say trend appears to be good. We have selected for the current year that this domestic
business should be growing around 16% to 18%, the trend appears that we may have to
revise our guidelines.
Q6. What is the capacity expansion for API, so can you please
provide update here?
Ans. We are still facing problem because that whole expansion got delayed because of COVID.
Q7. On the export side, just wanted to understand the outlook I
mean clearly this quarter is an impact of high base of last year’s quarter, on the outlook
side, how do we see the branded business and the generic business shaping up especially in
Europe of generic business?
Ans. Our branded business will grow around 12% in this year, due to some countries where we sell our branded products are disturbed such as Myanmar is disturbed by the turnmiol.
API business will grow around 8-10% in this year.
Q8. The outlook for the gross margin, you mentioned not to look at quarter-onquarter but there is a sharp jump in the high margin domestic business, so how do we see the upcoming year as a gross margins because this seems pretty low to us seeing your past
performance?
Ans. Our guidelines for this year on EBITDA margins side was almost around 25% and in Q1 we
have recorded around 27% growth and the trend is likely to be better, so after Q2 we will
revise our guidelines for the year.
Q9. The Dewas, the objective is to have an external sale or it is largely to have more of a
backward integration for the existing operations?
Ans. No, Dewas is purely for external base and captive consumption, it is not intermediate. It is
basically an API site.
Q10. Aceclofenac as a compound is that also you believe can
grow at 12% to 15% in the coming years?
Ans. A.K. Jain: Aceclofenac is continuously taking market share from others because the GI issues with
Aceclofenac is much less compared to all other NSAID’s and it is continuously taking the
market share from others, and we are driving that basically.
Q11. what would be the tax rate guidance for this year and next year?
Ans. A.K. Jain: I think current year and next year we will remain on MAT thereafter we will opt for that
lower rate of tax of 25% because by that time then your net credit should be almost
whatever accumulated net credits are that will be consumed.
Q12. What is the Capex plan?
Ans. The capex more or less now because almost on API side we do not have surplus capacity,
there will be also some kind of intermediate journey will be there and formulation side as
the business starts moving up some kind of balancing equipment and all will be needed.
Maybe one–one and half year after we may need even capacities for our domestic
production also because Sikkim plant is almost running at full capacity now so, we may
need to make some kind of more investment there, so overall capex cycle may remain
around Rs.400 Crores level for next two year to three years.
Q13. The API business once those expansions are in place what kind of
capacities we will have compared to the current levels?
Ans. Overall, capacities will increase by almost around 20% with all the three plants, two plants
at Dewas and one which is coming up at Ratlam itself. So, around 20% API capacities will
go up.
Q14. Zerodol what kind of volume growth that what kind of growth you record there, volume
growth in Zerodol?
Ans. A.K. Jain: Zerodol, last year it has grown by 18% so it is almost around 14% - 15% is volume growth.
In the first quarter it is almost around close to 30% is volume growth.
Q15. This 14% - 15% volume growth in Zerodol you think this is sustainable over the medium
– term?
Ans. A.K. Jain: We still see a huge amount of opportunity as far as Zerodol is concerned overall.
Some More Updates -
* Company is raising stake in Tropic wellness.
* Company add around 200 MR in the derma business.
To know more information, then visit https://www.screener.in
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