Kopran Ltd. - Has its time finally come?!

Stock Opportunities Not-so-Hidden Gems
155

Kopran ltd ( bullish commentary ) -

Q1 FY 25 concall and results highlights -

Revenues - 139 vs 117 cr
EBITDA - 18 vs 6 cr ( margins @ 13 vs 5 pc )
PAT - 11 vs 3 cr

Segment wise revenues -

APIs - 90 cr vs 73 cr YoY ( Domestic : Export sales @ 44 cr : 46 cr ). Bulk of API sales come from - Carbapenems, Macrolides, Urological Antibiotics and Anti - Hypertensive therapeutic categories

Company has 02 API manufacturing facilities. Company is a major player in sterile Carbapenems and a leader in - Atenolol molecule category

Formulations - 49 cr vs 44 cr YoY ( all exports - to both regulated and unregulated markets ). Ratio of Penicillin : Non Penicillin based formulation sales @ 34 cr : 15 cr

Formulations plant is located @ Khopoli, Maharashtra - making dosage forms like - tablets, capsules, dry powder and suspensions

Q1 is generally a lean Qtr for company’s formulations business. From Q2 onwards, should do a formulations sale of 80-90 cr / Qtr

Have received environmental clearance to commence production at the Panoli plant ( new API facility ) from Central Govt. State Govt’s clearance is awaited shortly

Company is planning to put up a vial filling line for their sterile Penems like - Meropenem, Doripenem, Ertapenem. This will help them improve their margins

Company is guiding for a topline growth of 18-20 pc with an EBITDA of around 100 cr for FY 25 ( LY EBITDA was 74 cr )

In Q1, EBITDA margins in API segment were 14 pc and 11 pc in the formulations segment. As the formulations revenues pick up, their margins should improve because of operating leverage

This FY, company hopes to clock a full year EBITDA margins of 14-15 pc. In 3-4 yrs, the aim is to reach 20 pc EBITDA margins. Also, aim to achieve 1200-1300 cr of topline in 3-4 yrs

The new Panoli plant should start contributing meaningfully to top and bottomline wef FY 26

Over a 2-3 yrs period, the Panoli plant should add 200-300 cr to the topline ( ballpark estimates )

However, for the Panoli plant to get US FDA approval, it ll take a min of 3 yrs from now

All the KSM that the company is making and hopes to makes are for captive consumption ( to improve backward integration ) and should help them reduce their dependence on China

For FY 26, FY 27 - the API segment should grow by > 30 pc CAGR because of operationalisation of the Panoli plant

Formulations should grow @ 10-15 pc CAGR for next 2 yrs

For the Panoli plant, company shall be focusing on CNS, Cardio and Anti-Diabetic ( basically all chronic therapies ) therapies.

Capex guidance for next 3 yrs combined @ 100 cr ( includes the Vial-filling lines for the Penems )

Company’s top selling molecules are Meropenem and Atenolol - contributing to roughly 20 and 15 pc of sales respectively. The next three molecules combined contribute to another 20 pc of sales ( roughly )

Company is the second largest maker of atenolol in the World ( first is IPCA labs ). In Morepenem, company faces competition from Aurobindo, Sun, Hester, Rajasthan Antibiotics. However, they have been the largest producer of Morepenem in India in last 6 months

Teva ( a global - generics giant ) is the largest consumer of Atenolol. They have recently stopped producing this API. Kopran has already supplied validation batches to Teva. Expect, Teva’s entire business to be routed to Kopran over a period of time ( in about 1 yr or so )

Disc: holding, biased, not SEBI registered, not a buy/sell recommendation

9 Likes
156

Latest SOIC YouTube video covering Kopran

Hope this helps

dr.vikas

2 Likes
157

Ratings update by CRISIL on Kopran

https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/KopranLimited_September%2003_%202024_RR_350234.html

dr.vikas

4 Likes
158

Any idea, why kopran has fallen by 18% today?

1 Like
159

Results seems to be the reason

1 Like
160

This is becoming very common in last couple of days due to negative sentiment. These types of reactions signal to panic situations or some bear cartel play. Result is not good but that does not mean that company has closed down. Topline is flatish and big dent in profit is due to raw materials price escalation. Everything remaining same, bottom-line is bound to improve as companies take time to pass on price escalation.

8 Likes
161

How come raw materials price escalated? I heard from another Pharma companies concall mentioning about softer raw material price helped their margin improve.

1 Like
162

Please see the raw materials figure from the result uploaded to exchanges.

1 Like
163

Pharma and chemicals should not be looked at quarterly basis. Product mix changes, shipment delays, plants shutting down etc. can impact margins in a particular quarter. Lets wait for concall to know more details if the overall growth plan is intact or not.
Disc. Invested around current levels to see if this is inflection phase in the company.

6 Likes
164

I’m sharing the views of Sajal Kapoor on Kopran

Please watch from 53 minutes on the timeline

dr.vikas

10 Likes
165

Kopran -

Q2 FY 25 results and concall highlights -

Revenues - 151 vs 152 cr
EBITDA - 15 vs 23 cr ( margins @ 10 vs 15 pc - steep fall )
PAT - 7 vs 14 cr

Segmental revenues -

APIs - 78 vs 82 cr YoY ( due lower API prices due Chinese competition )

Have commenced trial production from their Panoli Plant. Should begin commercial production in next 3-4 months. Will be making APIs like - Rivaroxiban, Apaxiban, Tricagrelor ( all blood thinners ), Lacosamide ( anti - Epileptic ) from this facility

Also working on developing and commercialisation of newer generation Penems from their existing API facilities

Formulations - 73 vs 70 cr YoY. Company’s formulations business is primarily an exports business. 25 pc of formulation exports are branded generics. Amoxicillin + Calvulanate Acid is their biggest formulation export

Company is making all efforts to improve their backward and forward integration at all their facilities to improve their cost competitiveness

Aim to do a 100-150 cr topline from Panoli Plant in FY 26. In 3 yrs, should be able to do a 200-250 cr topline from this plant

Company is putting up a vial filling line for their sterile Penems like - Meropenem, Doripenem, Ertapenem. This will help them improve their margins. It should take > 18 months to operationalise this facility

In the last six months, prices of most Penems is down by 25 pc. This has hurt the company’s topline despite doing good volumes. Penems contribute to 40 pc of company’s API sales ( led by Meropenem )

Company is still confident of clocking 80 cr kind of EBITDA for FY 25. Guiding for a much better H2 vs H1

Pre-Commercial expenses of Panoli plant are not captured in the Q2 results

Company has not lost any mkt share ( in fact they have gained mkt share ) despite stiff price aggression from Chinese players

Company was supposed to get commercial orders from Teva ( an Israeli company ) for supply of Atenolol. The same has been delayed because of the Iran-Israel war. Otherwise, the deal is on track

Disc: holding, biased, not SEBI registered, not a buy/sell recommendation

13 Likes
166

Excellent summary as always @ranvir sir.
Any dip on share price is an opportunity to accumulate Kopran.

2 Likes
167

I tried to do DCF analysis for this company,

image
image1436×1076 121 KB

Please let me know what do you guys think!
Thanks

2 Likes
168

Brief analysis of some of the new commercial products

Drug Life-Saving Therapy Type Condition Treated Top Manufacturer
Ticagrelor Yes Antiplatelet Agent Acute Coronary Syndromes (ACS) PolPharma
Apixaban Yes Anticoagulant (DOAC) Stroke, DVT, PE PolPharma
Rivaroxaban Yes Anticoagulant (DOAC) Stroke, DVT, PE PolPharma, Dr Reddy
Lacosamide No Antiepileptic Drug (AED) Partial-Onset Seizures Apart synthesis (India)
Riociguat Yes Vasodilator Pulmonary Hypertension (PAH, CTEPH)
Zhejiang (China), Metrochem (India)

Source - https://www.pharmacompass.com/manufacturers-suppliers-exporters/

3 Likes
169

Do you have a working excel you could upload ? Thanks

170

As per the enclosed disclosure one of the promoters Mridula Somani has acquired additional 3.66 % the equity. Mode of the acquisition has been mentioned as “Transmission”. My query is, whether this transmission is within promoter group i.e. from one promoter to another or from Non-Promoter ?
Have written to the company as well
Disc. : Invested
Kopran.pdf (358.5 KB)

1 Like
171

Transmission means within promoters. If one holder dies shares transfered to 2nd holder or heirs

3 Likes
172

image
image1744×949 118 KB

3 Likes
173

I am just sharing the views of Sajal Kapoor on Kopran

Please watch from 5 minutes on the timeline.

Not invested as of now.

dr.vikas

2 Likes
174

Kopran -

Q3 FY 25 Highlights -

Reported a PAT of 10 cr despite forex losses of about 3 cr

Formulations - revenues @ 73 cr, marginal decline QoQ. Segmental EBITDA @ 11.4 vs 9.7 cr QoQ

Company is contract manufacturing for 26 dosage forms and projects for another another 18 dosage forms are in the pipeline

APIs - revenues @ 95 vs 79 cr in Q2. Segmental EBITDA @ 11 vs 4.5 cr QoQ

Have seen price erosion across the API products in current FY ( because of Chinese competition ). This has resulted in topline and bottomline pressures despite healthy volume growth in the API segment ( mostly in case of Meropenems, Amoxicillin and Azithromycin )

Chinese competition is most intense in products where volumes are very high - like Amoxicillin. Company is diversifying away from these kind of high volume products so that they r insulated form the Chinese completion in future

Another area where Chinese competition is very high in the export Mkts is in fermentation based APIs. Company is staying clear of these high competition areas

For FY 26, 27 - aim to utilise 40 pc and 80 pc of capacity available at the newly commissioned Panoli plant

Expecting to grow topline in API segment by 10-12 pc in FY 26 and by another 20 pc in FY 27

At company level, should be able to grow @ 15 pc, 20 pc for FY 26,27 ( on the back of new formulation CMO contracts going online + the ramp up @ Panoli plant )

In next 4 yrs, company aspires to reach EBITDA margins in the vicinity of 17-18 pc at consolidated level

In the formulations space, company has 26 live CMO projects, another 18 in pipeline ( should be able to support future growth )

Company buys Amoxicillin API from both India and China

Pricing competition is intense in Penicillin APIs as its a fermentation based API

Once company’s share of CMO business increases, the lumpiness in their Qtly results should reduce. Aim to take revenue contribution from CMO business to > 50 pc by the end of FY 27

Almost all of Panoli API plant’s Capex is now over. Commercial production should start in Q1

Margin expansion in next 2-3 yrs to be led by higher capacity utilisations, greater share of business from CMO business, bottoming out of prices of Meropenem and other Penicillin based APIs, diversification into APIs that don’t have such intense Chinese competition

Disc: holding, biased, not SEBI registered, not a buy/sell recommendation

8 Likes