Piramal Pharma Limited

PIRAMAL PHARMA Q2 results highlights –

Revenues – 1911 vs 1720 cr, up 11 pc

Revenues breakup –

CDMO – 1068 vs 940 cr, up 14 pc
Complex Hospital Generics (CHG) – 589 vs 562 cr, up 5 pc
India Consumer health (ICH) – 256 vs 227 cr, up 13 pc

Gross Margins @ 66 pc

EBITDA – 315 vs 219 cr, up 44 pc !!!
EBITDA margins @ 16 vs 13 pc ( significant improvement ). Margins in Q1 were a paltry 10 pc

PAT – 5 vs (-) 37 cr

Completed rights issue in Q2 for 1050 cr. Debt reduced by 958 cr to 3823 cr – thank GOD !!! . Need to do a lot more here in future

H2 is always better than H1 for the company. Q4 is the best

CDMO Highlights –

Have recieved 40 pc higher orders in H1 this yr vs LY. Newer orders have a good proportion of contract manufacturing of on-patent molecules

Contract manufacturing of Generic APIs – also doing well

Five of company’s CDMO facilities have successfully closed USFDA inspections since Nov 22 – Digiwal, Pithampur, Sellersville, Riverview, Lexington ( these contribute to half of CDMO revenues )

Current proportion of CDMO business involved in on-patent / NCE manufacturing / development at 44 pc vs 35 pc 2 yrs ago

CHG highlights –

Expanding capacities to meet the increasing demand for Inhalation Anesthesia products

Maintained leadership positions in Sevoflurane ( 44 pc Mkt share ) and Baclofen ( 76 pc mkt share ) in US Mkt

Have a product pipeline of 28 injectable products in various stages of development

Concluded USFDA inspection at Bethlehem facility which makes CHGs ( received 02 minor observations )

ICG –

Spent 14 pc of ICH revenues on promotions / Ads

Power brands include –

Littles – grew 19 pc in Q2
Lacto Calamine – grew 24 pc in Q2
Polycrol
Tetmosol
I-Range ( I-Pill, I- Can etc )

Power brands grew 15 pc in H1 and contributed to 42 pc of ICH sales

E- Comm grew 34 pc in Q2 and formed 14 pc of ICH sales. Have presence across 20 E-commerce platforms including own channel ( http://Wellify.in )

Have launched over 100 new products in last 3 yrs. New products launched in last 2 yrs form 20 pc of ICH business

Management comments –

Expect high teens YoY revenue growth in H2 with material EBITDA margin expansion. LY H2 EBITDA margins were around 16 odd pc !!! ( Extrapolation – suppose the revenue grows by 15 pc, EBITDA expands by 200 BPS – H2 EBITDA can be around – 810 cr. Full FY EBITDA to be around 1200 cr vs 840 cr LY – that would be a big Jump )

As innovation component increases in CDMO business going fwd, margins in CDMO business likely to expand over next 1,2,3 yrs

As ICH business crosses 1000 cr / yr revenues, margins here should grow incrementally every year. Currently, margins in single digits

Currently, road to deleveraging mapped via internal accruals. No asset monetisation lined up

Asst turns to improve substantially as revenues keep growing

Capex retirements to be also met from internal accruals

Company operates a total of 17 sites across the three businesses – helps de-risk the business. Also helps serve customer preferences

Mid 20s EBITDA margins are feasible in the medium term – Nandini Piramal

Current interest outgo @ aprox $ 44- 48 million/yr

Macro trends on biotech funding still not back to pre-COVID levels. Big Pharma spending is back

Currently, employee cost @ 27 pc of revenues. Likely to come down only when operating leverage kicks in

Medium term ROCE potential is about high teens – should be achieved as EBITDA crosses 23-24 odd pc

Innovator CDMO to outgrow generic CMO – in all probability

Disc – holding, biased, not SEBI registered