Q1FY25 Concall Summary
Business Updates
- The decline in revenues is due to lower realizations and subdued API demand in export markets
- The greenfield project for intermediates and specialty chemicals at Gujarat will start from Q2 onwards
- The company incurred capex of Rs 52 crores during the quarter and total capex for full year will be Rs 200 crores funded through term loan and internal accruals
Participants
Dolat Capital
Axis Securities
Unifi Investment Management
Yogya Capital
DSP Small Cap
QnA
- The domestic volume was not impacted but in exports volumes got impacted negatively by 8% yoy and mainly the antibiotic category got impacted
- The export demand still seems slower and this should pickup from Q3 onwards and as far as FY25 is concerned H1 will see a negative rate variance while in H2 this variance will go away due to the lower base of last year and thus growth will be visible with new products from dermatology also coming in
- Specialty chemicals will see business doing well from H2 onwards and for full year can see a good growth of 50% in H2 on a yoy basis
- Since the export order book is more than 2.5 months there was an impact of price decline while in India the order book is around a month so price variance impact was not seen
- In many export markets the business happens on government tenders and there are many regime changes happening in global governments which could also lead to an impact on export volumes
- In the next 3-4 years the target is to achieve revenue run rate upwards of Rs 4000 crores with an annual EBITDA margins of 14-15%
- In terms of formulations working on 15 products across cardiology and oncology and these will be launched over the next 2-3 years
- Majority of the sales from oncology formulations will start from FY27 onwards
- When the API prices are lower the gross contribution margin should be higher and that is a function of lower prices and company has a target to achieve 35% gross contribution margins
- There are many challenges in the export business on availability of container and also cost of freight so export momentum should be lower in Q2 as well
- One reason why impact on margins is lower is lower contribution from exports which has come down from around 38% to 31% and generally the gross contribution margin in exports is higher
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