Granules Q2FY18 Concall Summary

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Financial Highlights

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  • Topline grew moderately by 9% to 777 crores as compared to 714 crores in the same period of the previous financial year.
  • Revenue for the Q2 grew by 8% to 393 crores compared to Rs. 364 crores in the same quarter previous financial year
  • EBITDA recorded a growth of 7% to 84 crores.
  • Profit after tax for the quarter was at Rs. 40 crores.
  • Standalone sales during the Q2 of the year were 374 crores, an increase of 9% compared with previous financial year.
  • EBITDA and PAT increased by 11% and 6% to 82 crores and 32 crores compared to the last financial year.
  • Total debt as on 30th September was Rs. 816 crores. Out of this, long-term loans were Rs. 305 crores and working capital loans were Rs. 511 crores.
  • Annual tax rate is estimated to be 31% 
  • 5-year period CAGR estimate is at 27-28%. 

Contribution to Sales

  •  FD, PFI, API – FD, PFI and API contributed 42%, 24% and 35% of the sales respectively, as compared to 37%, 26% and 37%of the sales in Q2FY17.
  • Geographical breakup – regulated market of US, Canada and Europe put together contributed 66% of Revenue in Q2FY18, compared to 63% in the same period last year.
  • Molecules breakup –
    • • Paracetamol contributed 34% of the sales compared to 33% in Q2FY17.
    • • Metformin contributed 31% of the sales compared to 30% in Q2FY17.
    • • Ibuprofen contributed 14% of sale as against 13% in Q2FY17.
    • • Guaifenesin and Methocarbamol contributed 5% and 1% compared to 5% and 3% in Q2FY17.
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CAPEX

  • Spent about 348 crores on CAPEX and in investments.
  • Majority of the CAPEX spent for increase in capacity of API and PFI in Bonthapally and Gagillapur and construction of oncology facility in Vizag.
  • Invested in the wholly-owned subsidiary in USA.
  • The recently concluded QIP and withdrawal from ECB helped to finance these funds.

Depreciation Impact

  • Started depreciating Metformin block and Module F, the PFI block. The hit has already started happening in Q2.
  • Depreciation of the investments in Paracetamol should starthitting from November and December.
  • The depreciation hit for the investment in Guaifenesinplanned in Bonthapally will happen somewhere in the month of March.
  • Oncology could happen either thisfinancial year or could slip into Q1FY19.

Dip in Margins

  • There is a marginal dip in the gross margin, primarily because the prices of some of key raw materials has increased compared to last year.
  • These raw materials are derivative from crude oil; as the oil price went up globally, cost of materialincreased.
  • Employment cost also has moved up because some of the projects are coming close to completion and getting ready for commercialization. Thus, there is enhanced headcount in operation side of it.
  • The increase in the material costs will be mainly passed on through to the customers.
  • Current EBIDTA margin is at 19%, lower than the usual 21-22%, owing to the under-utilized capacity.
  • The under utilized capacity will be optimally used by the year-end, resulting in EBIDA margin of 19-21% for FY18

Additional Stats

  • The market size for the Prasugrel tablet is over US $650 millions, as per the IMS market estimates.
  •  The total capitalized R&D for this quarter is 25 crores mostly in the GPI. Rs. 7 crores of the R&D expenditure have been written off.

Filings

  •  Last year, total of 4 ANDAs were filed.
  • A target of 10 ANDAs filings between Hyderabad and theUS facility is set.
  • Within this financial year itself, 4 products have been filed so far and remaining 6 products will be filed to reach a number of 10 ANDAs.
  • The USFDA approval for the Virginia plant is expected to happen in the current quarter itself.

Biocause and OmniChem

  • The Q2 Biocause revenue is around 67 crores and OmniChem at 35 crores.
  • The 50% share from Biocause is around 5 crores and OmniChem is nil.

Long-term Debt

  •  An increase of Rs.150 crores in long-term debt in the next 3-6 months can be expected.
  • Total long-term debt will be in the range of under Rs. 500 crores.
  • The total interest cost for long-term should be LIBOR plus 275 and short-term LIBOR plus 50-75.
  • Thus, on a Rs. 1000 crores debt, the interest payment would be around Rs. 40 crores.

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