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Hikal - Pharma & Agrochem

Concall Q4 FY19 notes.

  • Overall Growth in sales was 22%. Volume growth was 2-2.5%. Rest was value growth which was partly due to price increase and partly due to high margin products.

  • Export 80%. Domestic 20%.

  • Going forward focus will be more on the complex and high margin products.

  • Capex
    Rs. 350 cr planned cape to be done in next 18-24 months.
    Asset turnover from this new capex estimated at 1.5-1.75 times.
    This capex to be done at Panoli site for both pharma and agro chemical.
    In new capex CRAMS and Own Products in 50-50 ratio.
    Capex will be done for high value products with lower volume but higher margin.

  • 10-15% estimated growth in next 1 year and there after 15-20% estimated growth when the effects of capex kicks in.

  • 50 bps EBITDA improvement expected in next year.

  • China situation:
    30% of raw material is currently sourced from China, plan to reduce it further going forward.
    Availability of products from China has improved but rates not declining as of now.
    Passing on the increased cost to customers.
    Due to environmental issues in China, agro chemical business is moving to India.

  • Selling around 1500 tonne of Gabapentin. It forms around 20% of sales right now. It’s being sold to over 70 customers. No other product contributes more than 7-8% of sales.

  • Top Ten customers account for 75% sales in Pharma and around 80% sales in Agri.

  • All forex positions open as of now. Free float is around 30%. If it goes above 30% then we will do hedging.

  • Pharma:
    It was 59% of sales in FY19. 50% CRAMS and 50% Own products.
    15-17 products currently selling in CRAMS and 12-13 products in Own.
    Increase interest by Japanese for Generic Business, got approved by Japanese agency in May 2018.
    In Pharma 8-9% was volume growth and 25% value growth.

  • Agri:
    80% CRAMS and 20% Own products. 10-11 products currently selling in CRAMS and 5-6 products in Own.
    In Agri volumes were flat yoy and 19% value growth.
    Gross margins in Agri were lower in Q4 due to change in product mix. They should not be looked on quarterly basis but rather yearly basis because of change in product mix in different quarters. Margins in Agri were good on yearly basis.

Regards
Harshit

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Annual Report 2019

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Good insights in the annual report.it seems like investments in R&D are bearing fruits- especially in crop protection.
In crop protection, they have developed process for entire molecule for one innovator and a derivative for other innovator.some success in generic space too.
Success in developing intermediates which were earlier sourced from china is also encouraging.
In pharma R&D there is not much this year but hikal has expertise in pregabalin which goes off patent this year-this could bring in good revenues from now on.
Sitagliptin is other such molecule but 5 years to go off patent.

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