Company came up with a good set of nos in Q2, with sales growing by 10% and EPS by 25%. Its good to see come back to their normal EBITDA margins of 25-30% after a gap of a few quarters. A very interesting piece of commentary was their US generics business, where they are seeing much more opportunities and lower pricing erosion, leading to 20%+ growth. Concall notes below.
FY24Q2 concall
- Sales grew at 10%, Gross margin 75%, EBITDA margins ~ 28%, PAT margins ~ 19%
- Expect low teen sales growth and 26% EBITDA margins in FY24
- US:
o 28% YOY growth (1 new launch, 42 launched products, plan to launch 3-4 products in remainder)
o Growth was due to lower price erosion, market share gains in existing products and a couple of very successful new product launches
o Filed 2 ANDAs and plans to file 6-8 ANDAs during FY23
o High single digit price erosion
o Market landscape is changing, price erosion is coming down, its looking quite positive now
o Working capital requirements has not increased, instead consolidated inventory has come down to 71 days - Domestic:
o 13% YOY growth, launched 7 new products (3 was first launch in India)
o Volume growth was 6% (vs 2% for industry), Price increase: 5%, New product: 3% (Price and new product introduction was in-line with industry)
o In Q2, launched a new triple combination drug in cardiology (first time introduction) for which they undertook clinical trials. Pace of launches of such products have reduced in recent times due to tighter regulations
o Higher volume growth is due to better MR productivity and not due to geographical expansion
o Cardiac MAT growth of 9% in September 2023 (vs 11% for IPM). Growth for Ajanta was softer only in last 6-months because metXL was impacted due to NLEM price reduction
o Trade generics: 45 cr. (vs 38 cr. in Q2), 81 (vs 71 cr. in H1 FY24)
o Third fastest growing company in top 25 cos in IPM
o SGLT2 and DPP4 are being launched, along with different combinations. Since Ajanta had a late start in anti-diabetes, had some disadvantage - Emerging market (branded generics)
o Africa branded grew by 8%. Expect low to mid-teens growth in FY24
o Saw slowdown in Africa in past 4-5 months, but growth has come back recently
o Asia branded de-grew by (-8%). Saw some spillover of orders from Q2 to Q3. Expect low teen growth in FY24
o Have managed forex quite well, policy is to keep at least 50% of receivables hedged
o Launched 8 products in Q2
o Building business in countries in Central Asia, focus is changing from acute to chronic - Africa institution
o Growth of 14% YOY - CAPEX of 46 cr. in H1FY24 (full year planned capex of 150 cr. including corporate office). 60-65% capacity utilization currently. No major capex for next 18-24 months
- R&D stood at 5% of sales (scientists came down from 850+ to 800+)
- Tax rate will be 25% in FY24
- Global MR count is 4,500+ (2,800+ MRs in India)
Disclosure: Invested (position size here, sold shares in last-30 days)