Results are strong, with sales for the quarter up 21 % YoY and operating profits up 40 %. On a QoQ basis, sales are up 1 % and operating profits are up 4 %. Gross and operating margins improved both YoY and QoQ basis and currently stand at 56.5 % & 30.5 % respectively. CDMO segment showed good growth (on a small base though) and much of the growth came from GPL business, with non-GPL business reporting a 7 % decline.
Some highlights from the concall. Usual disclaimers apply (E & OE):
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USFDA: Received EIR for Ankleshwar facility, the inspection stands closed.
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Capex: Total capex plan for FY26 will be Rs.500 to 600 crore. This includes Rs.190 crore of pending capex carried forward from FY25 and additional Rs.350 to 400 crore for Solapur greenfield expansion for intermediates, Ankleshwar & Dahej brownfield expansion for API and a new R&D centre near Mumbai. The two brownfields will get completed by 2nd half of this year, by November / December. Solapur Phase I of 300 KL will be completed by Q4. Rs.70 - 80 crore will be spent on R&D centre. Phase II of the Solapur capex is put off to FY28 since all this will create enough capacity to take care of the anticipated demand until then.
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Product launches: Work on the products we are launching now started 4-5 years back. For patent expiries starting FY27 onwards, what we are working on now will launch FY28 onwards
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Growth: Volume growth for FY25 was 10 %. Current volume growth is in mid-teens, but there is price erosion. High single digit growth should happen in revenue, Q1 FY26 is looking promising. Volume growth next year will come from new products - a few more markets will open up plus new launches are also coming up. We are pretty confident of 15 % volume growth.
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Tariff: In the US, 3 industry bodies have made representation to the Commerce Secretary on 7th May for not having tariffs. Since there is resistance to tariffs from within the US, need to see how the situation evolves. Currently US market contributes 25 to 30 % of our overall business
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Working capital: As per new agreement, Glenmark Pharma gets longer credit period, upwards of 150 days. Higher sales to GPL result in higher receivables. This is what happened this quarter.
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OAI on Glenmark Indore facility will not impact us. We supply to all GPL sites and GPL will sort it out
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Outlook on US market: Typically, we see 4 to 4.5 % price erosion in our products. Price erosion happens when there is volume uptake, when launches happen, newer products etc. There is more price erosion in the U.S. as we are supplying higher end newer molecules (newly out of patent expiry)
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CDMO: Presently we have 3 basic products, a 4th one started last year but is slow currently. For the 5th project which is with an innovator from Japan where we are the API provider, regulatory approval is likely to come in H2 FY26 and not in H1 as anticipated earlier. Apart from this, a lot many conversations are going on currently. Our typical per contract range is about Rs.50 to Rs.60 crore (USD 7 - 8 million per opportunity)
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Margins: Expecting to maintain 28 to 30 % range going forward overall. Margin from GPL is not very off from our other businesses. But margin is a function of product mix. Older products have lower margins, and GPL has more proportion of older products. In CDMO, we are more in the Life Cycle Management space, which is ongoing business for Big Pharma, so our projects are not impacted by the funding environment. CDMO business will not be Rs.500-600 crore by FY28 (such a guidance was given earlier), will take longer
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Generic API business: Lot of new products are kicking off in FY25 and FY26.
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Asset Turnover - Expect to reach 2 X in the long run though initially it will be lower
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Differentiated Platforms that we are working on, we may give more details later this year.
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Not expecting to take on any additional debt
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Top 5 products contribute 35 % of our revenues
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Therapy wise contribution has changed slightly as we have seen good traction in the urology segment
Overall, a steady quarter but the market seems disappointed with the slow pace of execution, however. Both on the capex side and the revenue growth outlook.
(Disc.: Invested)