FY22 was overall a good year, sales grew at 16% (vs 12% in FY21) and PAT grew by 9%. Gross margin reduced to 75% (vs 78% in FY21), EBITDA margins: 28% (vs 35% in FY21), PAT margins: 21% (vs 23% in FY21). Management is confident of maintaining 28% EBITDA margins in FY23. Notes from concall below.
- Gross margins came down to 72% due to: 1) 1.5% one-time charge for 1 flu product sent to US 2-years ago which will expire and 2) 1.5% due to US price erosion. Expect to maintain 75% gross margin going forward as branded business should compensate for US price erosion. There has also been increase in API prices which can impact gross margin in the coming quarters
- Q4 sales grew at 15%, Gross margin ~73%, EBITDA margins ~ 24%, PAT margins ~ 17%.
- US:
o (-3%) YOY de-growth (no new launches). Saw very aggressive price erosion in base portfolio (around 18%). Expect this to normalize to 8-10%
o Filed 5 products in Q4FY22 (total 8 in FY22), expect 10-12 ANDA filings in FY23. Currently, 20 ANDA are under approval
o Out of 42 final ANDA approvals (3 tentative), have launched 39 products (3 in FY22)
o Will get new ANDA approvals once FDA reinspects their facilities. FDA normal overseas inspections has not yet started, they are only doing mission critical inspections
o The Bystolic approval was FDA’s call. There has been no inspections from FDA
o US market demands higher inventory and receivables than other markets - Domestic:
o 13% YOY growth (and 21% for FY22) (30 cr. trade generics, 117 cr. in FY22)
o In domestic trade generics, company is focusing on specialty molecules more than just volumes. This is lower gross margins than branded but lucrative enough on ROCE basis
o Growth is higher than IPM in all the 4 segments (cardiology, ophthalmology, pain, dermatology)
o Launched 0 products in Q4, cumulative launches in FY22 was 16 (4 first to market). Most launches have been in cardiology and diabetes
o NLEM is <20% of India sales. Passed on 10.5% price hike allowed by government
o Expect mid-teens growth in FY23 (and faster than market) - Emerging market (branded generics)
o Africa branded grew by 37% (and 42% for FY22)
o Asia branded grew by 50% (and 14% for FY22)
o Expecting mid-teens growth in FY23 - Africa institution
o De-growth of (-38%) YOY (and -24% de-growth for FY22) - Redirecting growth effort towards branded business
- Forex gain of 73 cr. made majority of other income of 116 cr.
- CAPEX of 154 cr. in FY22. Net fixed asset turns have increased to 2x
- 55% of R&D expenses was directed towards US generic market and rest for branded generic market
- Estimated maintenance capex is 200 cr.
- Quarterly other expense rate was 258 cr. (increased slightly from 250 cr.)
- Deterioration in receivable days (from 95 to 113 days in FY22): Receivables have gone back to pre-covid levels. During covid, receivables came down to abnormally low levels. Receivable days should stay at these levels
- Inventory was ramped up last year to take advantage of covid opportunities. This year, its normalizing.
Disclosure: Invested (position size here, bought few shares in last-30 days)