Divi's Laboratories

My notes from the earnings call, pls add if I missed:

  1. Increase in topline was led by volume growth across the portfolio. No significant contribution from Covid related drugs. No one off big increases in drug prices.
  2. Cash c. Rs 1340 crs, Receivables c. Rs 1550 crs and Inventory Rs 1740 crs
  3. Europe and America contributed 74% to topline.
  4. Product mix Generic APIs 59%/Custom Synthesis 41%
  5. Growth on constant currency basis c. 39%
  6. Cartenoid sales for the quarter c. Rs 127 crs
  7. Gross block addition in this quarter c. Rs 216 crs
  8. Capex slightly delayed due to Covid (shortage of technicians plus shortage of equipment).
  9. Gabapentin- Intend to maintain the leadership – will expand volumes of the product and the intermediate for the same – should help in improving margin
  10. Increase in profits came from (a) backward integration (b higher volumes © Crams business
  11. Other expenses down due to some one-off legal expenses last time.
  12. Capex had 3 parts:
    a) Debottlenecking at 2 existing plants
    b) Backward integration in 2 existing plants
    c) New products
    Both (a) and (b) have started contributing and will contribute more in coming quarters.
    Complete capex will be done by end of year and await FDA approvals. This capex will be enough to meet the expected demand. Ready to look at incremental capex if required.
    No significant contribution from the capex in this quarter.
  13. Q: Is increase in APIs a temporary or structural story
    Increase in volumes of APIs has been across the portfolio largely due to following:
    a) Chinese API supplies have gone down – we do not know whether it is because they could not manufacture or because there was lower demand for Chinese goods
    b) Due to Covid, demand for antibiotics, specialized therapy medicines etc has gone down and demand for anti-viral, anti-inflammatory medicines has gone up which helped Divis.
    c) US and Europe pharma companies in general seem to be preferring Indian companies over Chinese companies.
    In general, trends are encouraging for Indian API players, though such trends tend to evolve over a period of time. Custom synthesis business is also expected to benefit from the China issue, growth outlook is strong on account of their chemistry, technical capabilities (which have a high gestation period).
  14. Kakinada capex – Company is ready to proceed but govt approvals are still pending.
  15. Capex under PLI scheme: Still under evaluation. The scheme in general is more for import substitute products rather than export-oriented products like theirs.
  16. Risk of big pharma setting up their own API capacity- Tough considering the higher costs in US/Europe in general, trained people, regulatory compliances etc.
  17. No plans to enter biologics, injectables etc.
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