Sales grew at 12%, Gross margin ~77%, EBITDA margins ~ 29%, PAT margins ~ 23%. I feel results were actually good. Despite no new US launches and aggressive price erosion in base portfolio (in double digit), US sales have increased which means they are gaining significant market in some molecules. Gross margins have expanded to 76% which means branded business is compensating for US pricing erosion. A key was management commentary on US operations, they have toned down US growth ambitions as they want to be very careful about maintaining return ratios. Below are my concall notes
- US:
o 3% YOY growth (no new launches). Saw aggressive price erosion in base portfolio (double digits) resulting in lower growth. Impact on gross margin has been neutralized by branded business in India and emerging markets
o No new product launches or approvals, 1 product filed this quarter
o Filed 1 product in Q3FY22 (total 3 in 9MFY22), expect 10-12 ANDA filings in FY22 (7 in Q4FY22). This bunching up of filings is only limited to FY22 and going forward it will be evened out
o Will get new ANDA approvals once FDA reinspects their facilities (got this input in one CRL)
o Very judicious about allocating capital to ANDA filings, have scaled down the ambitions to 10-12 filings from 18 filings earlier - Domestic:
o 18% YOY growth (30 cr. trade generics, 87 cr. in 9MFY22)
o Growth is higher than IPM in all the 4 segments (cardiology, ophthalmology, pain, dermatology)
o Launched 11 products (1 was first to market), cumulative launches in 9MFY22 was 16 (4 first to market). Most launches have been in cardiology and diabetes
o NLEM is ~15% of India sales
o Inorganic opportunities are coming with a large price tag, very careful about overpaying for any asset - Emerging market (branded generics)
o Africa branded grew by 87% YOY
o Asia branded de-grew by (-1%) YOY. This is largely because of supply chain disruptions and lockdown in certain markets. Company is confident of reasonable grow in the coming quarters
o 60-65% of countries where Ajanta Pharma is present has price control where government fixes prices - Africa institution
o De-growth of (-53%) YOY - CAPEX of 116 cr. in 9MFY22 (budget of 200 cr. for FY22)
- Quarterly other expense rate is close to 250 cr. (increased from 225 cr. levels)
- Have added people in R&D, new blocks at Guwahati facility also employs more people now. Quarterly run rate is ~160 cr. and there should be only incremental changes going forward
Disclosure: Invested (position size here)