One thing I have noticed in the Solara vs IOL Chemicals debate, it’ll be obvious to many people but was not to me.
If you see operating leverage , it is nearly 2X for solara as compared to IOL Chemicals, meaning for a 1% increase in sales we would expect Solara’s EBIT to grow at double the rate compared to IOL Chemicals. Of course this is because of higher gross margins of Solara
Dear all,
After the equity dilution by Solara its EPS has substantially come down. Even though the PAT growth was healthy but EPS growth was substantially lesser. Can any one kindly comment on this perspective ?
Not bad numbers. But no major fireworks. Awaiting comments from learned members. Compared to its peers such as Solara, IOLCP is trading at a PE of less than 10, whether market will continue to assign this PE or rerate?
Also Mr. Vijay Garg has not mentioned about any upcoming quarters. Awaiting Q3 concall for better clarity.
Chemical Division performed well this quarter but declined in drug division revenue, Earning call will be clear this and will set up a trend…overall flat numbers…
Promoter holding has increased from 41.89 in Mar’20 to 43.69 in Dec’20 Quarter…
Q3FY 21 earnings con call on Wednesday, February 17, 2021 at 12:00 P.M. As promised by Vijay Garg earlier, good to see that they are holding con calls after quarterly results.
Q3FY21 investor presentation.
Very detailed and clear presentation.
Good to note that company is having few new API products in pipeline. Hope market will consider this as a diversified company instead of single product company.
IOLCP Q3FY21 investor presentation.pdf (2.6 MB)Feb 2021 con-call key points
Ethyl Acetate
Ibuprofen
Under construction
Targets
New product criteria
Other points
All in all your company is well placed in the market to challenge or compete global players
I feel market is overreacting to pessimistic statement of falling Ibuprofen prices to USD 11 in next 2-3 years given by Mr. Vijay Garg in the last earnings con call resulting in fall in OP margins in upcoming quarters. I am not sure whether any corporate governance issues are there in the company. Other learned members may provide their comments on this aspect.
Overall I feel there is no change in fundamentals since the company has repeatedly mentioned that they will diversify into other API products to reduce the over concentration on Ibuprofen. Also 150 Cr capex is planned for next couple of years.
I agree @reacharjunr . Probably, the market is reacting to the revised (lower) revenue target and expected fall in Iburpofen prices. However, despite this the management said they are confident of 15-20% growth if not 25%. To me that is reasonable growth, something I can live with.
Plus, the management seems responsive to shareholders concerns, by acknowledging their over reliance on single product and aggressively diversifying the product pipeline.
My views may be biased, but I am very open to change my opinion on reasonable facts 
Disc: Invested
Thank you.
Look forward for any other info that is triggering price fall.
Hi guys,
I would love to know your thoughts after the recent con-call.
I would like to point out a correction to the above insights offered by @rmehta26 . The Rs.2,400-2,500 Cr guidance is for FY22 not FY21. FY21 will most likely stay flat vis-a-vis FY20.
I have a few concerns which I have been trying to wrap my head around.
Concerns-
1. Ibuprofen spot prices correcting to $12-13 (this year they were $14-15 and the contracted prices were $15-16) and expected to go touch $11 in the medium term.
2. Not a lot of growth coming in from new molecules (drugs) in the near term due to slow ramp up and the usual 15-18 months gestation period
They are also expanding their Ethyl Acetate base (currently running full capacity at 87,500TPA) by 30%. Mr. Garg said there’s a fundamental shift to the business and they expect better than erstwhile margins. (earlier margins have stayed in the range of 8-10%). And they can scale up the capacity in the coming year itself by investing Rs.10 Cr.
Now doing some back of the envelope calculation, they must be making around 600-700 Cr revenues currently from this product. So the additional capacity would add 180-200 Cr to the topline, albeit at a lower margin vis-a-vis drugs. (Last-Q margins: 15%, This-Q margins: 17%).
If they are able to sustain the margins say at 13-15%. This adds about 20-30 Cr worth of profits. (The expenditure is in turn value-accretive at east at the moment with a high IRR).
I believe the coming year could be flatish in terms of profitability growth due to a hit on Ibu prices (and the Ibu margins incredibly high at around 35-40% this year going by their EBITDA).
The one thing I am failing to clearly get is what all capacities of what all products have been commercialised and can go to full scale when. Because in Q2 concall they said they are “planning” on capacities for Gabapentin, UDCA, increasing Fenofibrate, etc. So if anybody has a clearer idea as to the product wise capacities on-stream, being constructed and also in the pipeline.
If we consider a 5 year horizon, the capacities at any stage could be on stream by then and at full scale (major “if” involved, as to whether they can do full capacity utilisations for all the products… a little bit of respite is their product selection criteria and involving only decently growing molecules). By what I can gather from the calls and doing back of the envelope calculations, full capacities could add roughly 1500Cr of topline from Drugs alone and about Rs 300 Cr of Ebitda (as their Ebitda guidance is 20-25% for new drugs).
Their current TTM Ebitda is Rs 618 Cr. And the addition would be at best 50% growth (this is not even factoring in Ibu price erosion).
So basically everything is contingent on the clarity as to at what stage their new products are and the pipeline as well. So is it that the 150-200 Cr capex they’ll incur would be mostly for the future products they come up with and which are not planned yet or would it be for currently planned products? If it is the latter, then there’s every reason why the current PE is low.
Sorry for such fragmented thoughts at the moment.
I would absolutely love to be appended and even more to be contradicted! 
Disc: Invested from much lower levels
Forum members, may bits a good idea if we collectively identify these information from various sources - market data, management commentary, annual reports, competitors etc. - that will give us some revenue visibility going ahead.
I will update the information and put a revised snapshot
metformin Hydrochloride price is around $6-$7 per Kg
@rmehta26 brilliant initiative!
It would be awesome if you could add the below to the list you already have! 
Upcoming multipurpose F.L.U. plant (commercial production from FY22)
Capacity Utilisation as on Q3
I have a doubt regarding capacities as mentioned below
Light on F.L.U. plant was shone in the Q3 Call with the capacity figures as mentioned above. In the Q2 call, this was said:-
So are the F.L.U. capacities in addition to the already commercialised capacities? As in, in Q3 call they said to be running at 90% capacity utilisation for Fenofibrate and the F.L.U. plant would come on-stream in FY22.
This is basically my doubt regarding what all capacities are already in place and being constructed.
Another concern with the Q3 results is the apparent contraction in Ibuprofen realisations, which appears rather stark.
As per Q2 call:-
Their H1 new product realisations were ~47 crore.
Their 9M new product realisations were ~141 crore (as per Q3 call). So in Q3 they did a business of ~96 Crore.
Now, coming to quarterly trend of realisations:-
| Segment | Q2 FY 20 | Q3 FY 20 | Q4 FY20 | Q1 FY21 | Q2 FY21 | Q3 FY21 |
|---|---|---|---|---|---|---|
| Drugs | 293 | 326 | 292 | 313 | 335 | 303 |
| New Products (rough trend) | 6 | 8 | 10 | 17 | 30 | 96 |
| Ibu Guess | 287 | 318 | 282 | 296 | 305 | 207 |
I have made a potential scale-up trend for the new product revenues.
This shows a 30% contraction in Ibu realisations q-o-q and lowest in quite some time which is quite worrying. Though other products contributing substantially is a positive sign.
In the next con-call, we should try to get prices (which will be difficult to get in my opinion due to competition), however, we should try to at least get the capacity utilization for FY22.
May be someone can drop a mail to them to include average capacity utilization factor in the investor presentation along with the capacities.
So going forward we can play with the capacity utilization factor and because the prices are average, i think the up/down movements are taken care of in the average.
I am just starting to research IOL, and have found the discussion here very insightful.
I have a quick question to the members here: in FY20, there was roughly Rs 350 crores worth of sales/ purchases with a related entity (Vivachem Intermediaries Pvt Ltd). Is there a good explanation for such large transactions? Do the investors see this as a major concern? If no, why not?
Thanks
This is definitely a red flag,
Big news, Texas had a major disruption due to heavy snow, great news for IOLCP in the short term
