Unichem laboratories ltd

rakesh parikh interview with cnbc post q2 fy 14…

http://www.moneycontrol.com/news/results-boardroom/us-showing-good-growth-ems-steady-unichem-labs_973128.html?utm_source=ref_article

Conference Call Highlights by Capital Market

  • The Company's standalone revenue grew by 2% YoY to Rs 269.57 crore for the quarter ended September 30 2013 primarily driven by the 9% growth in International business to Rs 63.35 crore.
  • However, the domestic branded formulation business grew by subdued 1% YoY to Rs 173.9 crore for the same period. The Revenues from API business fell by 7% YoY Rs 28.90 crore for the quarter ended September 30, 2013. The API's volume growth is high but diverting some of it to the captive consumption during the quarter.
  • The Company's EBITDA margins impacted due to the implementation of lower notified prices on NLEM products, higher spending on continuing medical education (American Society of Hypertension), power and fuel and international freight during the quarter.
  • The Domestic Formulation market on MAT September 2013 is estimated at Rs 72343 crore {with bonus units at full value} by AWACS, reflecting a growth of 6.8% over MAT September 2012. Further, the Domestic Formulation Market stood at Rs 19140 crores for the quarter ended September 30 2013 {July to September} reflecting a growth of 2.8% over quarter ended June 30 2013.
  • The Unichem Laboratories revenue is estimated at Rs 725 crore (AWACS MAT September 2013) and growing at 4.5% with a market share of 1.0% (in covered market 2.0%).
  • It has filed 29 ANDA's with US FDA and received 15 approvals (2 tentative approvals) as on date. It has already launched 10 products and balance products to be launched in Q3.
  • Recently, The R&D shifted to Goa plant and witnessed some stabilization. It expects one or 2 ANDA filings every quarter for the next 2-3 years going forward.
  • It has full impact due to the NLEM pricing policy (approximates to Rs 5.3 crore) during the quarter. The major products in domestic market fallen into in the first list of NLEM category, and had a major impact in value and volume during the quarter. Also, it almost lost Rs 7.5 crore in inventories due to the trade related issues during the quarter.
  • It expects the NLEM impact to be Rs 13.5 crore (Q2~5.5 crore) for FY'14. It expects NLEM impact in Q3 and Q4 may not be same as Q2. This is expected due to the introduction of new products to drive the volume and value. It has launched 15 products (9 in Chronic and 6 in Acute) during the quarter.
  • It expects EBIDTA margins will be back to 23-24% in the next two years time line on the back of right product mix.
  • The management indicated that Indian Pharmaceutical Market is not expected grow double-digit for the FY'14 on the back of trade related issues and NLEM impact.
  • It has Capacity constraints for the API's production and the discussions are at advanced stage to acquire API facility.
  • The tax rate expected to be 21% for the FY14.
  • It has forex cover for 62-70% of USD revenues and 80% of Euro revenues for the medium term (ranging from 15 days to 54 months).

Dear Hitesbhai:

I have very little understanding of pharmacy so some of my writings s may be low levels. I am highlight negatives (playing devils advocate )

FY13 conf calls dr dhingra says pharma industry has not shown the kind of growth as expected. Overall industry expected to grow 9% and unichem should grow 11-12%.

  • Their international API has shown good growth but they may be on lower base. How much that can be sustained to be seen? However international formulations should drive future growth

  • Reorganization or realignment through sales force etc is an organization streamlining. It helps cut cost and generate volumes but that cannot form backbone of any growth story

  • Till past years growth(international) is also coming from International API where margins are not the best as in Domestic formulation.( However, EBIDTA margins should sustain due to other reasons)

  • Domestic growth is expected from Volume growth. Although there are new products launches in Fy14, volume growth will be key driver. As investor, we are used to expect growth from new launches contributing significantly which may be missing here

Growth has been coming in stages, first from International API then expected from International Formulations and domestic formulations some reorganizing. But nowhere is growth blockbuster( in international API growth has been good but contribution as a % % of sales is not great)

I feel it is like a Huyndai i10 car being upgraded to i20.

Increase in sale and increase in EBIDTA margins in coming 2 yrs should contribute but unless there is a PE rating , Unichem may be another 20% grower.

I think management likes to win the race but more with a slow and steady approach. On that basis/mgt approach, I am not very hopeful of great performance from subsidiaries.

I put token investment in Unichem yesterday. I already read all difference of opinions / arguments in this thread (yes all 10 pages till date). So much things to digest and take a decision call. Yet to study AR but have conducted significant level of study.

Seems like turnarround story really testing patience of investors’ physiological behavior here. It is a matter of EQ and not IQ here.

So where have Buffet and Lynch style investors run away from this thread ?

Unichem results out. Nothing inspiring. Interim Dividend of Rs 4/- per share announced.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/Unichem_Laboratories_Ltd_180114_Rst.pdf

Domestic sales growth (12%) and Exports (17%) - Overall 14% sales growth.

Q3FY14 EPS up 6% compared to last year. 9MFY14 EPS too up 6% compared to last year.

Forex Gains : 38L compared to 2.92L in the previous year period.

Even Forex Adjusted PAT is up only 16% Year on Year.

I think the company is still not getting its act together… the special dividend might prop up sentiments but overall I feel stock is fairly valued with limited upsides…growth seems elusive as compared to others like ajanta and alembic.

**Dear Hitesh,
**

In view of the less than exciting result, are you still willing to hold the stock for 1 more quarter? Personally, how much more time are you willing to give this one before selling out?

rajat,

I have sold out of the holding in unichem during the recent upmove.

hitesh.

Dear Hitesh,

In the pharma sector which stock would you be most bullish about at the current market prices in lieu of Unichem?

Most of the pharma stocks have run up quite hard and I feel dont offer the proper risk reward equation.

**
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JB Chem based on valuations might still offer some upsides.

**
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Overall I feel we might be in a slightly overheated market with some stocks running ahead of their fundamentals.

**
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**
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Hitesh Bhai,

Would it be wise to reduce our positions and be in cash and wait for a correction? If not which stocks would be best to invest at CMP be it from any sector?

Regards,

Rajarshi

Highlights of the call by Capital Mkt:

The Company’s standalone revenues grew by 14% YoY to Rs 264.9 crore for the quarter ended December 2013.

The Revenues from Domestic Branded Formulations grew by 9% YoY to 166.4 crore during the quarter. The Revenues from International Formulation business grew by 4% YoY to Rs 61.1 crore for the same period. The Revenues from API business grew by sharp 81% YoY to Rs 35.4 crore for the quarter ended December 31 2013.

In spite the higher NLEM impact and higher material and R&D cost, it is able maintain the margins at the 18% during the quarter.

The Domestic Formulation market on MAT December 2013 is estimated at Rs 73893 crore {with bonus units at full value} by AWACS, reflecting a growth of 6 % over MAT December 2013. Further, for the quarter ended December 2013 {October to December} the Domestic Formulation Market stood at Rs 19028 crore reflecting a growth of 4.9% over quarter ended September 2013.

The Unichem Laboratories revenues is estimated at Rs 756 crore (AWACS MAT December 2013) and growing at 6.5% with a market share of 1.02% (in covered market 2.1%). For the quarter ended December 2013 {October to December} revenues is estimated at Rs 203.4 crore and growing at 12.4 %.

There was expected bounce back in the IPM growth in the Q3 but that has not happened due to the continued NLEM impact. It also indicates that expected trend in Q4 may be the same, and expects modest growth.

In the Q2 pricing policy impact is 5.7 crore and 5 crore for the Q3’FY14. The annualized impact will be 20 crore (Rs 14-15 crore for the current fiscal).

It also indicated that trade related margins issues were settled with retailers and stockists during the quarter. The net-net impact on the current average sale is 68-70 lakh per month.

The anti-infective market is growing at low pace now, but it expects to grow at high single digit to low double digit growth going forward.

In API’s, the exports were boosted by the base effect and the previous order backlog. The expansion is going on to overcome the capacity constraints.

The Company has filed 28 ANDA’s with USFDA and got approval for 16 ANDA’s (2 tentative) as on 31stDecember 2013. It has launched 10 products in the market and the remaining expected by end of Q4. The US market is expected to be promising going forward.

The off take from the US CRAMS not great but slightly improved from the past two quarters.

The Western European markets the tender business is growing.

The formulation facility expansion will happen in the Goa facility, for API’s it is looking for acquiring new capacities.

During the quarter the Company received the full proceeds from sale of Indore SEZ plant to Mylan Laboratories Limited amounting to Rs 160.5 crore.

The company has approved plans and projects relating to API, Biotech (R & D) and Formulations at different stages of implementation to enhance capacities for future growth. The capital expenditure requirements are being met through internal accruals and proceeds from sale of Indore SEZ plant to Mylan Laboratories Limited.

The Capex spent is Rs 50-60 crore for the nine months ended December 2013.

The R&D spend is 5% of Sales for the quarter. The R&D expected to be 4-5% for the FY’15.

The tax rate expected to be 22-23% for the FY’15.

The Company expects 200-300 bps improvement in revenue growth for FY’15. This is expected to be on the back of initiatives taken on the chronic and acute care is expected to show good growth.

Hello all,

Unichem 2013 AR has an item which I am not able to make much of.

Overall Capex for 2013 is almost 3.5 times 2012 - from 19.5 crores to 65 crores. However, the biggest chunk of capex is in non CSIR approved, which is 4 times from 16 crores to 65 crores.

Does investment in CSIR approved units result in tax breaks? If not, then it does not matter. If yes, then why & where is such a huge jump in R&D investment happening?

Keeping aside the CSIR for a moment, why has there been a such a huge jump in R&D investment? Is this expected to be result in payoff in future, or is there something murky here?

I checked for related party transactions & there is one jump of 34 crores in debtors…but not much clarity on the 65 crores R&D investment.

Does anyone have insight?

Thanks,

Arun

Unichem Labs chart seems to be forming an interesting inverted head and shoulders kind of pattern. Its not a classic type of pattern but resembles one.

(In the past the levels of 200 plus were acting as strong resistance for the stock price. It used to correct strongly from those levels. But it seems now the stock is on a stronger footing.)

Breakout point is closing above 225-230 levels and sustaining those levels. Post that it could be ready to challenge its all time high of 270 levels and go on to pattern targets of 300 plus.

There was a big bulk deal of around 9.5 lac shares reported yesterday on 18/3/2014. No details about buyers or sellers available.

attached line chart shows the pattern.

Even on ground level I see some increased effort at marketing atleast in the derma segment.

re entered unichem as the techno funda picture seems good.


The deal was betwn promoters;

http://www.bseindia.com/stock-share-price/stockreach_bulkblock.aspx?scripcode=506690&expandable=9

Disappointing Q4 results! Revenues and PAT for q4 is flat YoY. What’s worse is major component in profit is other income at 2449.50 lacs

Q4 fy14 PAT- 3137 lacs

Q4 fy13 PAT - 3103 lac

Conf call details for today:

Unichem Lab

Concall

12-May-14

3.30 PM

022 3960 0896 / 6746 5896


Highlights of the call by Capital Mkt:

On consolidated basis, during FY 2014, Revenue stood at Rs 1133.4 crore, up 4.9%. PBT Excluding Exceptional Items Rs 171.2 crore, up 17.2%.

PBT Margin stood at 15.1% as against 13.5%, up 160 basis points.

PAT Excluding Exceptional Items â Rs 128.2 crore, up 13.2 %.

FY 2014 standalone basis

On standalone basis, for the FY 2014, sales grew 4% to Rs 1044.20 crore.

Company's EBITDA margins for the year ended March 31, 2014 stood at 17.4% (against 18.5%) despite the impact of NLEM, higher R&D spend as Center of Excellence at Goa is fully functional and operational, and higher expenditure with regard to realignment of domestic business divisions.

Domestic Formulations business clocked revenues of Rs 655 crore as against Rs 635.3 crore, up 3%.

Revenues from International Formulation Business grew 1% to Rs 255.2 crore as against Rs 252.7 crore.

Revenues from API business stood at Rs 118.7 crore as against Rs 108.9 crore, up 9%.

PBT Excluding Exceptional Items grew 10% to Rs 178.8 crore.

PBT Margin grew to 17.1% as against 16.2%, up 90 basis points

PAT Excluding EO grew 5% to Rs 135.8 crore.

March 2014 quarter

During March 2014 quarter,The Co's standalone revenue from operations stood at Rs 244.1 crore for the quarter ended March 31, 2014 against Rs 243.5 crore.

Revenues from Domestic Formulations stood at Rs 139.1 crore as against Rs 142.2 crore in the same period last year.

Revenues from International Formulation Business came in at Rs 74.4 crore compared to Rs 69.9 crore.

Revenues from API business stood at Rs 24 crore for the quarter ended March 31, 2014 compared to Rs 29.2 crore recorded during the same quarter of the previous year.

Other income includes onetime income due to sale of property. The company normally gets Rs 3-4 crore of other income. Maximum it can go to Rs 5 crore.

Other details

Center of Excellence at Goa is fully functional & operational and filings of ANDAs & DMFs have resumed with 3 ANDAs & 3 DMFs filed during the quarter.

Cumulative filings of ANDAs stood at 31 of which 17 ANDAs are approved (Including 2 tentative approvals).

Cumulative filings of DMFs stands at 35.

Both API plants are working at 100% capacity. So the company is expanding at Pitampur. This is in advanced stage so it will contribute in the next quarter.

The Company has acquired an API facility in Maharashtra, the completion of balance statutory formalities and modification & upgradation are under progress.

During the quarter Domestic portfolio grew at 4.8% as against 6.6% of IPM.

During the quarter Domestic Acute portfolio showed a robust growth of 20.9% as against 4.9% of IPM.

During the quarter Domestic Chronic portfolio fell 3.9% as against a growth of 10.6% of IPM.

Coming quarters gives ray of hopes for the company's Chronic business. It is very confident of coming back to double digit growth on annualized basis. On quarter basis it might vary. Quarter 1 will not have double digit growth but rest three quarters will have double digit growth.

Non NLEM Portfolio grew at 10.3% as against 8.8% of Represented Market.

NLEM portfolio fell by 17.5% as against 12.3% of Represented Market.

Market share of Unienzyme (Therapy- Gastrointestinal) increased by around 2.6% from MAT March 13- MAT March 14.

Market share of Serta (Therapy- CNS) increased by around 3.5% from MAT March 13- MAT March 14.

The co's rank as on MAT March'14 stands at #25 as against #28 in MAT March' 13.

Debt/Equity for FY 2014 stood at 0.03 (Excluding Cash & Cash Equivalents). The company continues enjoy Debt Free status.

ROCE for FY 2014 stood at 25.3%.ROE for FY 2014 stood at 15.8%.

R&D exp of standalone works out to 5% while it is 4.7% for consolidated financials.

Information on subsidiaries

The company gave details of subsidiaries which till now they were not giving.

Niche Generics Limited, the 100% UK Subsidiary recorded net sales of GBP 10.5 Million for FY 2014 (against: GBP 10.77 Million) and Net Profit of GBP 0.3 Million (against Net Profit of GBP 0.10 Million).

Unichem Pharmaceuticals USA Inc., the 100% US Subsidiary clocked net sales of USD 12.3 Million for the year ended March 2014 (against USD 8.45 Million), up 45.6% and reducing its Net Loss to USD 0.3 Million (against a net Loss of USD 0.62 Million).

The US subsidiary is the major contributor to the consolidated financials.

The company launched 10 products in FY 2013 and no launches were in FY 2014. Run rate for the 10 products will be over $ 1 million.

The company has planned three more launches in the US in 2 quarters. So this gives the confident about the US subsidiaries.

The company has one approval from brazil and two â three more are in the pipeline.

Unichem Pharmaceuticals Do Brasil Ltda, the 100% Brazilian Subsidiary recorded net sales of Brazilian Real 1.74 Million for the year ended March 2014 (against Brazilian Real 1.54 Million) and Net Loss of Brazilian Real of 2.9 Million (against Net Loss of Brazilian Real 2.96 Million).


Highlights of the call by Capital Mkt:

The sales grew by moderate 10% YoY to Rs 290.99 crore for the quarter ended June 2014 and PAT fell by 16% YoY to Rs 30.20 crore for the same period. The growth in Sales was primarily driven by robust 22% growth in Exports business to Rs 103 crore despite the subdued 4% growth in domestic business to Rs 187.99 crore.

The domestic formulation business grew by 2.5% to Rs 180 crore for the quarter ended June 2014. However, The Revenues from International Formulation Business grew by robust 33% to Rs 74.65 crore for the quarter ended June 2014. Also, The Revenues from API business (Excluding captive consumption for formulation business) grew by 12% to Rs 33.82 crore for the same period.

The volume growth is 6.2% as against market volume growth is 3.8%, price growth is 1% as against market price growth is 1.6% and new product growth is 3.5% during the quarter.

The Unichem Pharmaceuticals USA Inc., the 100% US Subsidiary clocked net sales of USD 4.67 Million for the quarter ended June 30, 2014 (corresponding period of the previous year: USD 2.23 Million) showcasing a robust growth of 109.4 %. The subsidiary turned profitable, having reported a Net Profit of USD 0.02 Million for quarter ended June 30, 2014 (corresponding period of the previous year: Net Loss of USD 0.21 Million)

It filed 2 ANDA’s with US FDA during the quarter taking the total filings to 33 as on 30th June 2014. It has received 17 approvals (2 tentative) as on date. Also, the Cumulative filings of DMFs stand at 35 as on date.

The Company launched 10 products in the US market. It has 2 more products expected to launch in the current quarter of which shipment already started.

The Domestic Formulation market on MAT June 2014 is estimated at Rs 77,529 crore {with bonus units at full value} by AWACS, reflecting a growth of 6.7% over MAT June 2013. Further, for the quarter ended June 30, 2014 the Domestic Formulation Market stood at Rs 20065 crore reflecting a growth of 8.8 % over quarter ended June 30, 2013.

The Unichem Laboratories Limited’s domestic revenue is estimated at Rs 799 crore (AWACS MAT June, 2014) and growing at 8.9% with a market share of over 1% (in covered market over 2%). For the quarter ended June 30, 2014 revenue is estimated at Rs 202 crore and growing at 10.5%.

During the quarter, The Company Domestic portfolio grew at 10.7% as against 8.8% of IPM. Further, the Domestic Acute portfolio showed a robust growth of 24.5% as against 7.7% of IPM for the same period. However, Domestic Chronic portfolio showed a growth of 2.8% as against 11.5% of IPM during the quarter.

The Acute portfolio which restructured last year is showing the results. Further, the monsoon setting in the Q2 will be much better than Q1.

The Chronic also added few verticals last year looks to be good. The Company expected to add 150 more MR’s in the Q3’FY15 which budgeted last year. This expected to result better growth for chronic portfolio.

The Non NLEM Portfolio showed a healthy growth of 12.2% as against 7.7% of Represented Market (MAT May’ 14). However, the NLEM portfolio de-grew by -7.9% as against -10.3% of Represented Market (MAT May '14).

The impact due to the DPCO 2013 is Rs 21 crore on annualized basis for the last fiscal. The new NLEM impact expected to be lower than last year on the Company. The any NLEM price hikes expected to factor in the Q2&Q3.

It has done with 95% domestic business restructuring. The remaining restructuring in distribution expected to complete by Q3. After all the internal corrections and supply chain corrections, it expected to produce desired results. Further, it expects domestic business to grow much better than Industry going forward.

The European business grew by 9.5% during the quarter. This growth expected to grow going forward.

The EU commission decided to impose fine on Niche/Unichem (Jointly and severally) contending that it had acted in breach of EU Antitrust rules. The EU reached this conclusion because its subsidiary Niche Generics agreed to settle financially crippling patent litigation with Laboratories at the beginning of 2005. However, this has been challenged in EU courts recently.

Highlights of the Call by Capital mkt:

The standalone revenue from operations grew by 3% YoY to Rs 278.2 crore for the quarter ended September 2014 and net profit fell by 38% YoY to Rs 22.3 crore for the same period.The subdued growth in Sales was on the back of robust 24% growth in International business to Rs 78.9 crore despite the 4% decline in domestic formulation business to Rs 166.6 crore for the same period. Also, The Revenues from API business (Excluding captive consumption for formulation business) grew by subdued to 2% YoY to Rs 29.5 crore during the quarter.

The Domestic Formulation market on MAT September, 2014 is estimated at Rs.80565 crore {with bonus units at full value} by AWACS, reflecting a growth of 9.1% over MAT September 2013. Further, for six months ended September 30, 2014 the Domestic Formulation Market stood at Rs 42,440 crore reflecting a growth of 10.9 % over six months ended September 30, 2013.Co’s revenue is estimated at Rs 815 crore (AWACS MAT Sept, 2014) and growing at 10.7% with a market share of over 1% (in covered market approx 2%). For six months ended September 30, 2014 revenue is estimated at Rs 417 crore and growing at 12%.

It filed 1 DMF during the quarter. The Cumulative filings of DMFs stand at 36 as on 30thSeptember 2014. The Cumulative filings of ANDAs stood at 33 of which 17 ANDAs are approved (Including 2 tentative approvals). It has launched 12 products up to the end of September 2014 quarter.The USA Subsidiary continues to show a robust sales growth, by growing over 100% on both quarterly and six monthly basis as compared to corresponding periods of previous year. It reported a profit of USD 0.36 Million for the quarter ended September 30, 2014

The Domestic portfolio grew at 13% as against 12.3% of IPM (AWACS) during the quarter. The Domestic Acute portfolio showed a robust growth of 26% as against 11.7% of IPM during the quarter. The domestic chronic portfolio showed a growth of 4% as against 13.7% of IPM during the quarter.The growth of Domestic portfolio for H1 stood at 12% as against 10.9% of IPM (AWACS). The Domestic Acute portfolio showed a healthy growth of 25.5% as against 10.2% of IPM for the same period.The Domestic Chronic portfolio showed a growth of 3.4% as against 12.8% of IPM for the six months period ended September 30, 2014.

The Non NLEM Portfolio showed a growth of 15.1% as against 14.1% of Represented Market (AWACS) for the quarter ended September 2014. The NLEM portfolio showed a growth of 5.3% as against 4.5% of Represented Market (AWACS) during the quarter.The Market share of Serta (Therapy- CNS) increases by ~4.5% and improves its rank to #1 in Sertraline (Solids) segment (MAT Sept’14). The Market share of Ampoxin (Therapy- Anti Infective) improves by ~3.5% and moves up to rank #1 (MAT Sept’14).

There is Rs 10 crore of impact due to the change in distribution model to C&F (Carry & Forward) in UP (3 distributors) and Pune (one distributor) during the quarter.With this conversation, 75% (earlier 55%) coming from the C&F and 25% coming from distributors models during the quarter. It expects to convert the remaining distributors to the C&F by the end of current fiscal.

The NLEM impact from Losar (~26% lower than last quarter) and Tricor (~27% lower than last quarter) prices is coming from the June 2014. The impact for the cardio-diabetic business due to these is Rs 8.5 crore during the quarter. This eventually impacted the growth during the quarter. However, it is realigned field force to push the product, witnessing some positive signs.The secondary growth is much higher than the industry growth in domestic market during the quarter.

The formulation exports to the US market grew well during the quarter. Also, Other emerging markets also showing robust growth and grew by more than 20% during the quarter. It is hopeful that this will continue in coming quarters as well.The Europe business has still been challenging during the quarter. There is no new business for contractual business here, but before H2 some new contractual business may start going forward.The divalproex sodium (Depakote ER) product already launched the product and doing well. There is no major price increase during the quarter.The Goa formulation plant is inspected by the US FDA last month and no major findings.It has 2750 manpower working in the field as on 30thSeptember 2014.