Hikal – Pharma & Agrochem

Hikal Ltd –

Q1 FY 25 results and concall highlights –

Revenues – 407 vs 388 cr, up 5 pc
EBITDA – 58 vs 50 cr, up 16 pc ( margins @ 14.3 vs 13 pc )
PAT – 5 vs 7 cr, down 30 pc ( due to elevated depreciation and interest costs )

Current Debt on books @ 759 cr
R&D spends @ 4 pc of sales

Segmental revenue breakup –

Pharma –
Sales – 229 vs 225 cr
EBIT – 9 vs 10 cr ( margins adversely affected by scheduled plant maintenance )

CDMO : Own products @ 37 : 63

Crop Protection –

Sales – 177 vs 163 cr
EBIT – 21 vs 17 cr

CDMO : Own products @ 70 : 30

Company has 05 manufacturing sites @ –

Bengaluru – APIs and advanced intermediates – US FDA approved

Mahad – fungicides, herbicides, intermediates

Taloja – fungicides, insecticides, intermediates

Panoli – has 02 manufacturing sites for Pharma and Agrochemicals. Pharma site is US FDA approved for KSMs and APIs. Agrochemicals site makes fungicides, insecticides and intermediates

Their R&D center and a mini plant is located @ Pune

Company has already commercialised 27 APIs and 22 AIs in addition to several Pharma and Agro Intermediates

Company has completed development and validation of 05 animal healthcare products. Company is on track to validate several other products by end of current FY. These will then be submitted for registration and eventual commercialisation

Company is seeing increased customer enquiries in both their Pharma and Crop Protection – CDMO businesses

Company has got regulatory approvals for its APIs from LATAM, SE Asia and ME’s regulatory bodies and is steadily improving its customer base in these areas

In crop protection business, challenges like overcapacity, overstocking continue to exist

Increased depreciation and interest costs in Q1 ( combined to the tune of 10 cr ) are because of capitalisation of new manufacturing assets. As these assets get utilised, profitability should improve significantly

Company’s API development pipeline is robust at 9 products. Expect to launch 02-03 products / yr – going forward

Company’s Pharma CDMO business has 02 products in commercial stages. Their volumes are expected to ramp up over next 02 yrs. Additionally, 02 of their advanced intermediates for NCEs are currently undergoing phase – 3 trials

In the generic agrochemicals, the Chinese dumping of oversupply is severe. In the patented space, that’s obviously not the case. However, the problem of overstocking exists in both spaces. This should correct by Q3/Q4 and should then aid company’s volumes and margins in their Agro – CDMO business

In the Pharma Space, the effect of China + 1 can be clearly felt via increased customer enquiries

Once the animal healthcare products go commercial ( say in next 12-15 months ), they can be clocking 300-400 cr / yr kind of sales inside next 3-4 yrs ( ie – once the ramp up is complete )

Guiding for 10-15 pc CAGR growth on topline for next 3-4 yrs with improved EBITDA margins ( in the vicinity of 18 pc or so ) – the management admitted that it is a conservative guidance

Disc: not holding, not SEBI registered, not a buy/sell recommendation