Some more points (skeptical:)) worth taking note from AR13
-There is practically no change in The reasearch manpower, which stays at 250 (247 in 2011) whereas the total manpower has grown substantially. Also the R&D/revenue % is falling starting 2011 from 5.6% in 2011 to 3.6% in 2013.
-The growth in this fiscal looks impressive on subdued growth of last fiscal. But the overall growth remains at around 10-11%. And management maintains there could be 3-4% revenue loss due to new drug pricing policy.
I am learning about the business, please correct if wrong, I see some gaps in what management talks and delivers.
Management talked about a new unit business unit unifem (gynecology in 2011) and deploying odd 150 field force on that, but not much information about that.
Management has put repeated emphasis API business turnaround, but this time they didnāt talk about it much. And I donāt see any practical changes as the revenue mix remains roughly 90-10 for formulations and API for last several years now.
Hi Donald- The idea with all international subsidiaries is to essentially file product registrations wherever they can and sell formulations; the commentary on Niche (http://www.nichegenerics.com/aboutus.htm) was muted at best, focus remains on UK, Germany and Poland markets; not sure how much of it is UK manufactured and in that context, you make a good point on offshoring; they have incorporated a new subsidiary in Ireland to access what they called a fast growing tendering market
Unichem is a solid name as far as the domestic formulations market is concerned with all the chemists praising it. However in exports the no of ANDAS specially for US mkt seems to be on a long drawn path. With overhang of NPPA pricing capping should we consider switching it to a more predictable n visible growth story like Kaveri n Astral?
Total Income FLAT at 265.58 Cr v/s 264.86 Cr.
EBIDTA up 6.4% to 50.86 Cr from 47.80 Cr.
Net Profit up 8.9% to 36.1 Cr from 33.14 Cr.
EBIDTA margin is 19.2% v/s 17.2% (MQ-13) and 18.1% (JQ-12)
NET Profit margin is 13.6% v/s 12.7% (MQ-13) and 12.5% (JQ-12)
Total Raw material costs as a %ge to Income is 36.1% v/s 39.5% (MQ-13) and 38.8% (JQ-12)
Employee costs to Income is 15.6% v/s 14.3% (MQ-13) and 12.8% (JQ-12)
Other expenses to Income is 29.2% v/s 29.1% (MQ-13) and 30.4% (JQ-12)
overall disappointing set of numbers. flat top line. in spite of higher employee cost they are able to increase the EBIDTA margin. exports are flat inspite of INR depreciation
Yes disappointing results. The guided growth of around 15% didnāt seem to materalise. Both the domestic and exports are flat. The stock has rightly been punished today. This one is flattering to decieve.
Yes disappointing results. The guided growth of around 15% didnāt seem to materalise. Both the domestic and exports are flat. The stock has rightly been punished today. This one is flattering to decieve.
Attended the Unichem AGM. Almost all the shareholders were asking for bonus issue.
This was my first AGM so I had no idea that we need to register beforehand if we need to ask any questions. ( So missed the chance of asking some qs but nevertheless focus was on subsidiaries)
Some of the highlights are:
1). The cost for Indore SEZ was 110 cr and sale was at 160 cr. Profit 50 cr. Proceeds will be realized in this quarter. SEZ was sold due to tax issues.
2). Mr. Mody pressed on the importance of sales force and why they are investing in it due to heavy competition.
3). Expansion of Goa facility to provide operating leverage and will be a far lower cost than that of Indore SEZ. 5 bn tablet capacity to be added at Goa. Total will be 7.5 bn tablets.
4). Sophisticated warehouse to be built at Goa.
5). Some of the subsidiaries are established for protection of IP. (eg: Unichem South Africa)
6). US subsidiary: Higher expenses for US subsidiary as there is no proper distribution system in place.
7). Brazilian subsidiary: Facing problem due to troublesome approval process in Brazil. 15 products pending approval and current subsidiary is generating revenue only from 2 products, hence loss making. Management is not sure as to when the approvals process will be completed.
8.Ireland subsidiary: Loss of business due to some change in tender process (Not quite sure about what this means)
9.Capex 100-130 cr. Expansion of fermentation policy.
10). 9.25-9.5% returns on investments in MFs.
11). DPCO will have impact of 2-3% on bottomline.
12). 18-20% of domestic turnover comes under NELM.
Unichem results are disappointing to some extentā¦
Domestic and export revenues both seem to be flatā¦
How the company addresses the growth problem needs to be seenā¦ Maybe if there is a concall we might get a better idea about management plans and explanations.
I think around 150-160 a large part of the disappointment would get captured into the valuationsā¦
In cases of reactions to not so good news, most of the punishment is meted out within the first two daysā¦ So Monday should be important day to watch market reaction.
Personally I think this is a stock to be bought for next 1-2 years and one has to be ready to digest these quarterly surprises whatever they might be positive or negativeā¦ till now the negative surprises have been moreā¦
On price front, stock seems to have held its earlier bottom inspite of bad newsā¦ cmp of 166 is ex dividend of Rs 4.5, so we need to see where stock price settles downā¦ My guess it should find good support near the earlier bottom region of 158-160ā¦
This stock never went up, in-spite of the so many positives the company had going with it. In hindsight, the market was right. Markets are way smarter than it appears.
Rohit, it seems theyhighlighted some of the problems with Subsidaries.But do they have any concrete plans to fix those issues OR do they expect to have similar problems 2 years down the line. i thinkit can be key determinant on whether it is really so undervalued or not.
On Sales force front, do they currently lag industry in (sales force as % of revenue) and are trying to meet industry standardsOR are they saying that we will be much more agressive then the industry and thus achieve strong growth. Any ideas?
Some questions for mgmt if a meet is planned with them.
All the R&D facility has been consolidate in Goa as CoE. This will bring advantages as every thing is co-located. However, the research manpower stands at 250 personnel only which is at 2011 level and has not improved much. Any specific reasonsā¦??
The R&D expenses have seen a deline from 5% of revenue to 3.5 % of revenue ???
Low profits in past (other than 2013) have been attributed to adverse product mix. what changes has been taken up in the product mix. can you take us through how the product mix has changed over a period of time.
There were issues related to lack of field force and field force attrition issuesā¦where are we on that. Are they addressed not addressed in processā¦Are we seeing similar issues in R&D personnelā¦???
There was a plan of USFDA aproval for baddi and Pitamputa formulation plants. Where are we on thisā¦?
Ccongratulations on completing the formulation facility at Pitampura. can you share the agreement with Mylan related to this facility. As I understand there was plan for USFDA approval plan for pitampura formulaion unit (seeling in US mkt). is there a change in plan ?
As I understand there were around 529 product registrations filed in 2011. Where do we stand in terms of total product registrations as of nowā¦?
would like to share some new customer, new geography sucsess storyā¦?
The sales for Niche generics has moved from 103 lacs GBP to 107 GBP and has turned positive. Is this turn around sustaianable and what makes it sustainable give just 4% revenue growth.
