Indoco Remedies
Q3 FY 24 concall highlights –
Sales – 459 vs 399 cr
EBITDA – 63 vs 62 cr ( margins @ 14 vs 16 pc – unexpected compression )
PAT – 16 vs 28 cr ( big miss ). Company incurred an exceptional cost of 8 cr towards provisioning for VRS at one of its Goa Site
Goa plant – 1 received EIR from US FDA in Q3
Segment wise revenue break up –
Domestic formulations – 216 cr, up 4 pc
International formulations – 197 cr, up 4 pc
(sharp growth in US and emerging mkts, sharp de-growth in EU, Australia, NZL)
API sales – 33 cr vs 16 cr
Indoco analytical services – 8 vs 4 cr
Company’s Goa plant – 2 ( for sterile products ) was given OAI status in Feb 23. Expect increased level of remediation costs to continue for some more time before the plant is again cleared by US FDA
Drop in EU sales primarily due to drop in PCM sales due overstocking by a particular customer
Company is trying hard to mitigate the effect of disturbances in Red Sea. The situation remains unpredictable
India business had a significant component of institutional sales in the base Qtr. Adjusted for that, India business would have grown at far higher rates
Higher depreciation incurred in Q3 due expanded manufacturing facilities
Overstocking issues in EU should be a thing of the past – after Mar 24. Apr 24 onwards, EU sales should pick up nicely
New introductions have done very well in Q3 vs flattish growth for legacy brands in India. Company is also withdrawing from a lot of smaller products/brands in the India business. That also had an adverse impact on Q3 India sales
Deficient rains in India in Q3 had an adverse impact on the sales of anti-infective where company has a strong presence
Company is making concerted efforts to reduce the overall cost structure of the company
In the medium term, the company aspires to go back to 22-23 pc kind of EBITDA margins ( this can potentially super-charge the company’s bottomline ). My take – The proof of the pudding shall however be in the eating
Company has a total of 2300 MRs on its payroll for India business
Capex guidance for next yr – 120-150 cr. Capex for FY 24 should be around 150 cr ( basically, the company is sitting on a lot of operating leverage … only if they realise it )
Company can more than double its sales with the current capacities
Company expects Goa- plant 2 to be cleared by end of Q2 next FY – at the earliest. It may take more time
Disc: hold a tracking position, biased, not SEBI registered
IMHO – the company has a lot of potential. Execution has been below par in the last 12 odd months. For the time being, I am ready to be patient and give them a lose rope for another 2 Qtrs – minimum
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