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Divis Laboratories Q1FY22 Conference Call Highlights

Divis Laboratories Q1FY22 Conference Call Highlights

Published on 10 August 2021 Views 25 Comments 0

Financial Highlights

  • Revenue from Operations stood at 1961 crores from 1730 crores a 13% rise YOY & 10% rise QOQ
  • Expenses stood at 1109 crores from 1008 crores rising 10% YOY & 3% QOQ.
  • EBITDA stood at 888 crores from 717 crores rising 24% YOY & 20% QOQ
  • EBITDA Margin stood at 45% from 41% YOY rising 4% YOY & 4% QOQ due to lower overall cost of raw materials & inventory
  • Depreciation stood at 73 crores from 56 crores YOY due to ever increasing capex by the company
  • Other expenses stood at 238 crores from 193 crores YOY & 259 crores QOQ
  • Employee Cost has also risen Sequentially & Year on Year and stood at 216 crores
  • PAT stood at 557 crores from 492 crores rising 13%YOY & 11% QOQ
  • PAT margin stood at 28%, being flat YOY & QOQ with slightly higher employee cost & other expenses offsetting the YOY EBITDA margin difference

Business Highlights

  • Revenue bifurcation - Generic: Custom Synthesis: 50:50 mix
  • US, Europe account for 71% of Q1FY22 revenues for the company
  • Exports contribute ~89% of Q1FY22 sales
  • Forex gain of 19 crore in Q1FY22 has been made by the company
  • As per the management, Margins can be maintained on the back of backward integration, technology modernization, green chemistry and other efficiency measures.
  • Management has planned for six growth engines:
    • Established generics (market share of 60-70%; Growth guidance:10%)
    • Increasing capacity of existing generics (market share of 20-30%, target to get to 60-70% share)
    • Sartans APIs – Leverage the already developed key starting material for Sartans, which gives advantage on both cost and impurities
    • Contrast media – Entering other segments with innovators and anticipated contribution in two years
    • Two substance projects being fast tracked with long term contracts
  • New generics – The company has already developed large volume niche molecules whose patents are due to expire from FY23-25
  • The company is currently operating at 80% production capacity
  • Management guided for future growth of around 10-15%
  • Estimated tax for FY22 by the management: ~ below 25%
  • Divi’s capex to further augment capacities besides preparing for growing opportunities arising from China plus one factor (strategy to diversify into other countries along with China)
  • The company has been building capacities in a few more niche APIs as per the evolving demand scenario in the backdrop of ‘China opportunities
  • Strong R&D capabilities & India cost arbitrage along with IP adherence are some legacy strengths, which drive incremental assignments from MNCs as per the management
  • The company has earmarked an aggressive capex of 3700 crore [1800 crores (existing plans) + 400 crores (custom synthesis blocks) + 1500 crores (greenfield Kakinada plant crore], over and above 2000 crore spent in the last five years.
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