Morepen Labs ConCall Q4 FY - 2018
Highlights of the Quarter:
- Net profit rises by 25% at Rs. 29.59 Crore.
- Net Sales Revenue up by 1.9% at Rs. 598 crore.
- Domestic sales up by 21.3% at Rs. 414 crore.
- The overall Home Diagnostic category grows by 34% at Rs. 103.35 crore.
- Blood Pressure Monitors and Blood Glucose Monitors records highest growth on annual basis at 78% and 39% respectively.
- Annual interest cost fell by 43% at Rs. 4.36 crore.
- The company’s aim to become a Zero Debt company by June-July, 2018. Total debt as of now is Rs. 10.5 crs, which will be paid by 2 to 3 months. This year out of Rs. 67 crs earnings, Rs. 45 crs was used to payback debt.
- USFDA clears company’s anti-asthma bulk drug Montelukast Sodium for sale in the US market. Company also gets a fresh patent for Loratadine Process
- Improved Home Diagnostics’ sales revenue, better Cost Control, Higher EBITDA, higher Cash profit and lower Interest cost aids in strengthening bottom line further in yet another consecutive financial year
API Business
- Domestic API business has got a jump of 110% during the FY18’Q4 and 61% jump in FY18 with a CAGR of 40%. Domestic Sale of Rs. 46 crore export is through Merchant Exporters
- Loratadine sales has almost trebled with growth of 196% in FY18 and 322% swing in Q-to-Q sales
- Montelukast has secured a growth of 87% during the quarter, Atorvastatin has 102% growth in FY18 and 68% FY18’Q4 and Rosuvastatin had a growth of 32% this year.
Home Diagnostic Services
- Home Devices portfolio has been growing with fast pace and has recorded a CAGR of 24%
- Total Gluco monitors installed during FY18 were 56% more than FY17 and have completed 2 million target (Blood Gluco Monitors - 38% growth and Glucose Testing Strips - 43% jump)
- BP Monitors have grown exponentially by 75% during the year and had a big jump of 57% in Q4.
- Nebulisers also shown a robust growth of 34% in this fiscal and exponential jump of 835% in FY18’Q4
Finished Dosage Business
- Finished Dosages has been growing steadily with a CAGR of 10% and has substantial increase of 44% in FY18’Q4
- Branded Prescription (Rx) products has grown by 33% during the Q4 with new brand launches
- Vitamins and Nutraceuticals have grown by 76% on Q-to-Q and Antibiotics have grown by 43% during Q4
- Branded generics business which suffered during GST implementation period has also bounced back with quarterly growth of 47%
OTC Business
- Lead Brands like Burnol (Burn Cream), Lemolate (Cough & Cold) and Fiber-X (Sat Isabgol) have bounced back in Q4 after bit slow down in last two quarters due to GST disturbance and have registered a growth of 22%
- Lemolate Sales have gone up by 37% in FY18’Q4 and Fiber-X has grown by 248% in Q4 and 36% in the FY18
Q&A
How will EBITDA margins improve?
EBITDA % has been stabilized over the years between 11-12% and is as expected to go up as sales of the US export market pick during FY19 and FY20. It would also show further improvement as volumes go up for branded sales. Margins will shoot up as manufacturing base increases for diagnostics devices in India.
Why was Q4 profitability down, despite the Revenue growth?
- Last quarter there is maximum provisioning due to the Auditor checks.
- There was price cut in Loratadine and their export margins decreased for API.
- Few expenses have been booked this quarter. For the other expenses part, around Rs. 2-3 crs was spent on the renovation of equipments used for API. Depreciation of around Rs. 2crs was done to remove old machines. Mostly all drawdowns were on Accounting parameters as they want maximise their provisioning.
Reason for Montelukast cost reduction?
Working under a lot of constraints as they were not having working capital facility from all banks and they had to use third-party banking for import and export facilities. Now that they are becoming debt free, all banks are ready to provide them credit. Now they have greater bargaining power in the market, they don’t have to spend extra money for doing export business. There would be around 5-6% savings. They can stock out better as they will have cash surplus and grow especially in the Diagnostic center.
There is a limit up to which prices can come down. They have almost reached rock bottom in terms of pricing both for Europe and the domestic business. Since in the US, there is no further cost-cutting, so even they wouldn’t face any more downturns and the price is bound to rise from these levels.
They don’t have any plans for acquisitions as of now.
There could be some news on the FDA and new molecules front shortly.
On the API front, they keep doing new product launches and new molecules are there in the pipeline.
On the diagnostic front, more money will be spent on the BP and glucose monitors and they will focus on manufacturing in India and reducing dependence on China and Korea and may begin exporting to more countries
Revenue from different geographies
On the API front,
Rs. 109 crs from India
Rs. 49 crs from USA
Rs. 21 crs from Spain, Germany and other European countries also some Asian countries as well.
In December they got approval for Montelukast from US FDA, their NDA shipment to America will start from next quarter and it will be on the shelf in Q3.
They are targeting a 14% CAGR for the business moving for forward.
They have plans for Promoter holding increase by 5% in the near future.
Funds:
Siddharth Basu - Individual Investor
RMRL Company
JS Trivedi - Individual Investor
Rahul Mardani - Individual Investor
Den Investors
VCK investments
