Company came up with mixed set of results (27% sales growth, flat PAT YOY). Organic growth lagged due to loss in sale of 2 molecules, one due to legal issue and other was a covid product. Oaknet has turned out to be a very good acquisition, and this has given them the confidence to acquire 9 derma brands from Glenmark. Concall notes below.
FY23Q3
- Guidance lowered to 25-26% (from 30% earlier) and 14-15% EBITDA growth (lowered from 16-17%) for FY23.
- Zayo revenues was 30 cr. in FY22 which has gone to zero due to legal issue. One more product launched during the 2nd COVID wave (called Zandi) was discontinued (30 cr. revenue contribution in FY22) and there was sales return of 18-20 cr. in 9MFY23
- Acquired 9 medical dermatology brand (anti-fungal & anti-psoriasis) from Glenmark. 3 brands (Onabet, Halovate and Sorvate) are ranked #1 in their respective segments. 3 other brands (Demelan, Dosetil and Aceret) are ranked in top-3 of their respective segments. These brands have declined for Glenmark in past few years, they were considered as non-core by Glenmark
- FY22 revenue base of these 9 brands: 85 cr. (purchased at 340 cr.). Will be financed fully through borrowings (8% rates). Gross margins are 78%+
- Net debt / EBITDA will go to 0.8-0.9x after current acquisition
- 70% of dermatology sales come from medical dermatology and is growing at 9-10%. Eris wants to position themselves strongly there
- Oaknet: 60 cr. at 27% EBITDA margins. 9MFY23: 183 cr. (160 cr. has accrued to Eris) at 24% margins. Will exceed 50 cr. EBITDA in FY23.
- Oaknet had 60% growth in doctor prescription (July, August audit)
- Insulin sales will be around 20 cr. in FY23 (was 6 cr. in Q3; expect 7-8 cr. in Q4). Will burn (-20 cr.) of EBITDA on Insulin. EBITDA burn has come down to (-4 cr.) this quarter. Expect next year to reach 50 cr. in revenues with breakeven EBITDA
- Margins have bottomed out in FY23 and will increase in FY24
- Zomelis reaches 92 cr. MAT in Dec 2022 (#1 rank), Gluxit reaches 51 cr. MAT in Dec 2022 (#2 rank)
- MRs: 3000 (consolidated), 2225 (standalone)
- Tax rate: 9-10% for FY23 and FY24. For FY25, blended booked tax rate will be 27-28%. Cash tax rate will continue to be 17% for next 5-years and booked tax rate will also come to 17-18% over 5-years post FY25
- Trial batches have started in Gujarat. Capex is largely finished. Depreciation will be 9-10 cr. per year
- On 75 cr. of gross block in Guwahati, Eris does turnover of 800 cr (10x fixed asset turns). So with Gujarat facility coming on stream, there will be no requirement of further manufacturing facilities for a long time to come
Disclosure: Invested (position size here, bought shares in last-30 days)