Supriya Lifescience Limited-Q1 FY25 result updates are as follows:
Company profile: The company has a niche product basket of 32 APIs with a reactor capacity of 597 KL/day. It has a presence across 128 countries and has 1700 customers.
a) Q1 FY25 results: The following are the Q1 FY25 result highlights for the company:
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The company’s Q1 FY25 revenue from operations stood at Rs 160 crores, up 21.7% YoY (gross margins stood at 69.7% versus 64.2% YoY), whereas EBITDA stood at Rs 62.5 crores, up 40.6% YoY. EBITDA margins stood at 38.9% versus 33.7%, up 524 bps YoY.
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PAT stood at Rs 44.6 crores, up 56.6% YoY. The PAT margin stood at 27.8% versus 21.6%, up 620 bps YoY.
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On a sequential basis, revenue/EBITDA/PAT increased by 1.5%/12.7%/22.7% respectively. EBITDA margins also improved sequentially by 385 bps.
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The company has significantly improved its working capital days from 215 to 168 days YoY. This was led by the reduction in inventory holding period.
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The company’s asset turnover ratio also improved to 0.68 in Q1 FY25 versus 0.63 YoY. The company has no long-term debt.
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The company’s strong performance was a result of enhanced market penetration and expansion into highly regulated markets, coupled with a broadened product portfolio. It is also widening its product basket through the infusion of newer molecules and therapeutic solutions.
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The company is also securing an increased number of regulatory approvals while simultaneously focusing on backward integration to deliver high product quality.
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In Q1 FY25, exports formed 84% of the total revenues versus 80% YoY. And regulated market sales were 54% versus 45% YoY.
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Backward integrated products formed 69% of Q1 FY25 revenues. It is in the process of backward integrating three more products.
B) Revenue contribution by region/product: The following is the company’s split of business by region/product:
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As of Q1 FY25, the company’s revenue split by regions stood as follows: Asia-33%, Europe-51%, LAC-9%, North America-3%, Others-4%.
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The revenue contribution from Asia dropped from 41% to 33% YoY, whereas that of Europe rose from 34% to 51% as it strengthened its presence in the regulated markets . North America’s contribution dipped from 9% to 3% YoY.
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Once the new product launches start contributing to revenues, the contribution from North America and Latin America will go up.
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As of Q1 FY25, the company’s revenue split by therapy areas stood as follows: Anesthetic-48.5%, Anti-histamine-11.6%, Vitamins-11.1%, Anti-Asthmatic-7%, Anti-allergic-4.6%, Anti-hypertensive-4%.
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The revenue contribution from anti-histamine category dropped from 19.5% to 11.6% YoY, whereas the contribution from anti-asthmatic therapy rose from 5.8% to 7% YoY.
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The company did not provide the revenue contribution from the top 3 APIs.
C) Future outlook: The following is the future outlook provided by the management:
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The management is strategically shifting its focus towards the regulated markets, which is poised to enhance the company’s overall profitability by expanding into regions with stringent regulatory framework.
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The company has developed a pipeline of new products to include anesthetics, antianxiety, antidiabetic, and other therapeutic areas which are slated for launch in the upcoming quarters. It is targeting products with backward integration, which has less competition, and is not being currently manufactured in India. Two product launches are expected by FY25.
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The company will expand its CDMO portfolio with the addition of ‘Module E’ which will provide an additional 340 KL of capacity. The company is set to double its capacity to 1020 KL by October’24.
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The performance seen over the last several quarters reflect the company’s transition of its business model from being predominantly focused on prime APIs to a healthy combination of APIs and CMO/CDMO segment.
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For the new products, the company is going with backward integration due to which it will be able to keep the competition out there as well.
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On the revenue front, the company has provided a 20% guidance for the next two years, but the management feels it can do much better than that. 22-23% revenue growth for FY25 seems easily possible.
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Q1 FY25 margins were high because matured products did really well in the regulated markets. The company had guided margins between 28-30% for FY25. However, it will easily be able to achieve 30% plus margins for FY25 (FY24 was 30%). It will be able to give a concrete guidance post Q2 FY25 results.
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Revenues from the CMO business will start kicking in from Q3 FY25. However, material revenues from the segment would start flowing in from FY26 onwards.
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The new facility at Ambernath (200 KL/day) is for finished formulations and CMO/CDMO where the company has different lines such as injectables, capsules, bottling, etc. Within the line, there is product fungibility as well. Besides, an R&D facility has also been set up at Ambernath where the research will go on for APIs which the company plans to launch in the future.
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Within the next 3-4 years, the company aims for a 20% contribution to revenues from the CMO business.
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The DSM contract is moving well. The company is in the process of registration of products in the European, Japanese, and the US markets. Once the registration comes through, there will be a good scale up in the contract.
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The company is also seeing a couple of other opportunities in the CMO space which are at advanced stages, and it will hopefully announce something positive soon.
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On the oral cancer detection kit, the company is applying for patents in various countries such as Korea, Taiwan, and Thailand. It expects to receive these approvals within the next 1-1.5 years. Complete commercial production process would also take at least 2 years.
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The Brazil government has also given an ultimatum that by December’24, all goods entering the country should be GMP compliant (which is currently coming from Chinese suppliers who are non-compliant). The company is ready to tap on this opportunity.
D) Key monitorables: The following are the key monitorables for the company:
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The company will launch the new APIs in the non-regulated markets first. As a result, the EBITDA margins there will be a little lower than the regulated markets. This could lead to a slight margin compression for 2-3 years until the product matures.
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The company will have USFDA audits and NMPA China audits in the latter half of the year.
The company trades at a TTM PE multiple of 33x.
Disc: Invested.
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