Caplin Point Laboratories

Good set of numbers from Caplin for 1Q24, with consistent growth in both topline and bottomline. Despite this, the stock fell ~6% from previous close, with a ~9% decline from the intra-day peak. This could possibly be due to profit booking, since the stock has had a big 7% rally in the last week and reached an ATH today before starting to drop.

Financial Highlights:

• YoY growth: 14.1% in Total Revenue, 19.3% in EBITDA, and 20.8% in PAT
• EBITDA margin at 34% vs 32.2% in 1Q23 and 33.8% in 4Q23
• Basic EPS increased by 21% YoY to ₹13.62. TTM EPS of ₹52 implies a P/E ratio of 17.2, close to 5-year median of 17.6
• Cash Flow from Operations was ₹88cr (63.5% of EBITDA), with FCF of ₹37cr
• Share of revenue (vs. 4Q23): LatAm & ROW – 88% vs 86%; US – 12% vs 14%
• Caplin Steriles (US business) reported 12.2% YoY growth in Op. Revenue to ₹46cr
• End of quarter inventories at ₹310cr and Cash and Cash equivalents at ₹807cr
• Final dividend of ₹2.5 per share for FY23

Business Highlights:
Emerging Markets:

• Good quarter for LatAm business both in terms of revenue and profitability
• Management credited the expansion of Softgel capacity at CP1 plant (Puducherry) completed last quarter with having quick payback and helping improve market position
• Entered pre-filled syringe market in LatAm with the launch of 8 new products
• Brand marketing business expected to meaningfully contribute to financials only by FY25
• Good momentum in SE Asia and CIS countries. No specific countries mentioned but likely to be Cambodia, Turkmenistan, and Uzbekistan as per 4Q23 investor presentation.

US & Regulated Markets:

• Establishment of front-end in US through incorporation of Caplin Steriles USA Inc. to be completed within 6-8mos. Plannning to launch 15+ new products within 12mos of incorporation
• No mention of profitability; had achieved PAT breakeven in FY23
• 7 ANDAs under review with the FDA; planning to file 10+ in the next 12mos.

Fairly good results overall. Things to watch going ahead would be growth in US business including ANDA approvals, and completion of capex projects (4 due in FY24).