Very good revival in sales from Ajanta, however some part of this growth is one-time due to the flu season in US. They had massive margin pressure due to losses on currency hedges, higher freight costs due to air freighting and large increase in MR strength. Ajanta has increased their MR strength by 50% in International markets. Concall notes below
FY23Q3 concall
- Sales grew at 16%, Gross margin 72%, EBITDA margins 21% (adjusting for forex derivative loss), PAT margins 14%
- FY24 Guidance: COGS ~26% and EBITDA margins ~ 25-26%
- Unrealized hedge losses are around 4% of sales. This along with higher air freight costs have contributed 6% to margin loss
- Launched 30 new products across markets. Such a large product launch required a larger field force expansion
- Employee cost increased by 18.5% (10% was due to increment and remainder was due to increase in team size). Have strengthened MR strength by 50% in international business (Asia and Africa), this has been the most aggressive field force expansion done so far by the company. MRs start performing in 2nd year and become really productive by 3rd year
- Total MRs: 4400+ (2800 in India) vs 4200+ in last presentation
- Expect mid-teens growth in branded generics
-
US:
o 61% YOY growth
o Filed 1 ANDA (9M: 4 ANDA), received 0 final approval (9M: 1 final + 1 tentative)
o Have 22 ANDAs under approval and 4 tentative approvals
o Benefitted from Flu season in Q3 (mostly Tamiflu). Do not see this benefit coming in Q4
o Mid to high single digit price erosion
o 16 cr. higher cost due to air freighting of some flu product
o Will have 1 launch in Q4 and 4-5 product launches in FY24 -
Domestic:
o 13% YOY growth , launched 21 new products in 9M (6 was first launch in India). 6% volume growth (vs flat for industry), price and new product introduction is at par with industry
o Gained 1 rank in cardiology (to 16), 1 in pain management (to 27) and lost 1 rank in dermatology (to 15)
o Trade generics: 38 cr. (vs 30 cr. in Q3FY22); 109 cr. in 9MFY23 (vs 87 cr. in 9MFY22) -
Emerging market (branded generics)
o Africa branded declined by (-13)%. 6% decline was due to INR appreciation vs Euro which has reversed now, so it should be better in Q4
o Asia branded grew by 17%
o Putting more thrust in Anglo Africa (especially Uganda and Kenya). Should start getting approvals from next year and launching products -
Africa institution
o Decline of (-15%) YOY - CAPEX of 114 cr. in 9M (full year planned capex of 150 cr.). Capacity utilization is 50-60% and should suffice for next 4 years growth
- 70-80% of receivables are hedged
- Other expenses normalized run rate (excluding forex) is 280-290 cr.
- R&D stood at 6% of sales
- About 50% of pledge will get removed from the funds raised by promoter entity
Disclosure: Invested (position size here, no transactions in last-30 days)