This company’s is more of narratives than actual fundamentals/financials.

• Margin is pretty less for an IT company. No point of MOAT if one is working at those margins.
• Profit growth has been almost negligible in the last two years.
• 92 P/E, most probably it can only decrease from here (No scope of re-rating).

Some questions:

• Can someone provide their own profit CAGR estimate? I see a lot of fellow VP’ers are commenting things like “Huge Growth Potential” etc. , but it will be really helpful if you can share your estimates.

• One thing I like a lot here is ProteanX and Digital Signing of documents, leveraging blockchain. In fact I had worked on an exact same project in university. However, tbh it’s pretty easy to make up frameworks like this, what advantage does Protean have over any other company which offers this service? The government wants multiple vendors.

Aarti Pharmalabs –

Q2 FY 25 results and concall highlights –

Revenues – 458 vs 439 cr, up 4 pc
EBITDA – 94 vs 88 cr, up 6 pc (margins @ 20.5 vs 20 pc)
PAT – 54 vs 52 cr, up 5 pc

Manufacturing footprint –

Dombivali –

Unit 1 – for APIs, Intermediates, CDMO

Vapi –

Unit -2 – for APIs, Intermediates, CDMO

Tarapur –

Unit -3 – for Xanthine and derivatives
Unit -4 – for APIs, CDMO
Unit -5 – for Xanthine and derivatives
Unit -6 – for Xanthine Intermediates

Atali –

New unit under construction for CDMO, intermediates

Revenue breakup for Q2 –

Xanthine Derivatives and allied products – 45 pc
APIs and Intermediates – 51 pc
CMO/CDMO – 4 pc ( it was 11 pc for full FY 24. This segment generally picks up pace in Q3 and Q4 )

Domestic : International sales @ 47 : 53

Xanthine derivatives business continues to witness stiff competition from China. Currently operating at peak capacity utilisations

Breakup of API sales –

43 pc regulated mkts
47 pc RoW mkts
10 pc Non Regulated mkts

Currently working on 55 CDMO projects with 19 customers. 28 projects are in commercial stages and 27 projects are in various stages of development

Some high value project deliveries are lined up for deliveries in the latter half of this FY ( may even spill over to next FY )

Expect the Atali project to commercialise in Q4

The expansion of Intermediates unit at Vapi unit is complete and is undergoing trial production

Company has successfully commissioned a Solar energy project at Akola. This should help save energy costs in a big way wef Q3

Seeing increased RFPs, enquiries from existing and new customers in the CMO/CDMO space. This should augur well for the company in the long term

The Xanthine spot mkt is very price competitive. However – the long term supply arrangements with big clients are price remunerative. Also, the Pharma applications of Xanthine derivatives mkt is also quite remunerative

Expect meaningful contribution from the new Atali site to flow through by FY 27 – as it takes to ramp up a Greenfield site

Top three therapies for company’s API business include – Anti Hypertensives, Corticosteroids and CNS. Top 3 API customers revenue contribution is around 20 pc for the company ( indicating low customer concentration )

Guiding for 20 pc + kind of growth in CDMO business this FY. Growth for next 2 FY’s should be even higher

Company currently commands 15 pc of world’s Xanthine capacity. Aprox 10 pc of world capacity is in Europe and the rest 75 pc is in China. Post the expansion of Xanthine facility ( sometime in Q3 FY 26 ), company should reach about 17-18 pc of world’s capacity ( @ aprox 9000 MT )

Guiding for a 15 pc kind of EBITDA growth CAGR for next 3 yrs ( company admits its a conservative guidance )

Company has 28 commercial molecules in their CDMO division. However their combined sales in FY 24 was < 200 cr. Actually, company is a relatively new entrant in this space. As time passes and innovators become more comfortable with the company, company is expected to get greater share of revenues for these products plus company is expected to commercialise more CDMO projects. Some of these projects / molecules may even go on to become quite large in future and company may get greater share of their manufacturing. Basically, in the CDMO segment – multiple positive optionalities can play out in future

Company’s segment wise gross margins vary from 35 to 65 pc. Lowest for Xanthine segment, highest for CDMO segment

Once the company comes up with added capacities of Xanthine, they intend to allocate a greater proportion of added capacity for Pharma applications in regulated mkts. That should improve the overall margin profile of the Xanthine derivatives segment

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

> Angel One Q2 FY25 earnings call highlights

• Regulatory changes like true to label, weekly index derivative product to one per exchange, increased contract sizes for index derivatives and a 2% increase in the ELM on expiry day.(Extreme Loss :This margin is calculated on the notional value of a position to cover any significant market shocks or extreme losses. It is designed to add a layer of protection against market volatility).*
• Will result in the near term softness but the management said they will be no change in the life time value of a customer
• Due to permanent impact of the true-to-label transition charges, angel one implemented several proactive tariff adjustments, including introduction of brokerage on cash delivery orders and the imposition of interest on disproportionate non-cash collateral offered as margin exceeding ₹ 50,000
• This quarter gross broking revenue grew by 2% sequentially, where they did not charge clients during the quarter. be negated we have to look Q3 results to understand how the introducing the brokerage pans out as they are other discount brokers ie,zerodha,dhan,etc offer 0 charge on delivery on equity
• By their rough estimate there will be 13-14% impact from broking related revenues but due to the run rate of 50 – 60% this impact will be negated in less than 2 quarters.
• ASBA in secondary market or UPI block, this is mandatory offering for QSBs from January onwards mgmt says there won’t be much impact
• So, about the loan distribution business angel one charge one time fee for a loan taken by the customer and if same person take another loan then they charge again and angel one is just a distributor so they don’t take NPA in case of default.
• Mgmt guided that EBITA margins still be ~43%
• Mgmt said AMC licence still on final stage and they could get it on any day.

I’m a relatively new investor into this bank, invested to play the IDFC merger premium.

I went through the investor presentation and was trying to understand if anyone has more details on the breakdown of provisions other than the prudent provisions on Toll and microfinance book.