Balaxi Pharmaceuticals Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Balaxi Pharmaceuticals Ltd (BALAXI) Q1 FY23 Earnings Concall

Q&A Highlights:

• [00:06:25] Archana Gude with IDBI asked about the sustainable EBITDA margin expectation going forward. Ashish Maheshwari MD replied that EBITDA margins the company will be seeing in the current range of 19% only.

• [00:07:46] Archana Gude with IDB enquired that once BALAXI’s plants will be operational in Hyderabad, how the mix will be going forward and the incremental margin improvement in 2-3 years. Ashish Maheshwari MD said that in branded the company has grown from 30% to 35% in FY22 and the target is to take it to 47-48% in next 3 years and margins will go up by 10-12%.

• [00:10:13] Sunny Agrawal of SBICAPS Securities enquired about company’s market share and the competitors in existing and new markets. Ashish Maheshwari MD said that as per the company’s market intelligence, it’s in the top 3 in Angola, in Dominican Republic number 1 and Guatemala number 2.  Competitors in Africa are Shalina and Prince Farma. In LatAm, the key competitor is Caplin Point.

• [00:12:51] Avinash Gorakshakar from ProfitMart asked about the volume increase in 1Q23. Ashish Maheshwari MD replied that it’s 42% growth, but added that it’s not strictly comparable to the previous quarter as Angola sales is the differentiator. Volume growth in LatAm in 1Q23 was around 30%.

• [00:14:19] Avinash Gorakshakar with ProfitMart asked if the GM growth driven by cross currency translation in 1Q23 will continue going forward. Ashish Maheshwari MD clarified that the India rupee generally depreciates against USD. However generally, BALAXI sees 1.8-2% in exchange rate profits. In 1Q23, BALAXI saw extra exchange rate profit coming in from Angola, which won’t be the case in future.

• [00:16:43]  Avinash Gorakshakar with ProfitMart asked about the company’s opinion on the state of the market in FY23, if the healthy growth is expected to continue. Ashish Maheshwari MD said LatAm markets are expected to see at least 40-42% growth in revenue.

• [00:19:29] Alisha Mahawla from Envision Capital enquired about the newer geographies where registrations caused upfronting of cost. Ashish Maheshwari MD replied the newer geographies were El Salvador, Honduras and Nicaragua. Going forward, BALAXI has registered the company is Ecuador and Chile.

• [00:27:56] Keshav Kumar of RakSan Investors asked what percentage of company’s sourcing is from China currently. Ashish Maheshwari MD replied that sourcing is majorly from India currently and about 30% or less comes from China.

• [00:34:23] Chinmay Garg with Dron Capital asked about the working capital cycle in Angola. Amol Mantri CFO answered that in Angola it’s about 150-160 days.

• [00:37:31] Chirag asked about future margins; once the manufacturing is in place, how will that impact margins. Ashish Maheshwari MD said that currently about 60% of manufacturing is done in-house and rest outsourced. On this, BALAXI expects 8-10% increase in margins due to own manufacturing, translating to 4-5% on a total revenue basis.

• [00:40:20] Harsh Beria asked about the cost structure for the marketing unit in LatAm markets. Ashish Maheshwari MD answered that cost structure for LatAm is very lean when compared to Angola and said Guatemala EBITDA looked lower due to promotions.

• [00:42:42] Harsh Beria enquired about the network of wholesales; how many does the company deal with in LatAm and Angola. Amol Mantri CFO said in LatAm the company is working with around 80-85 wholesalers and distributors. And in Guatemala, BALAXI is working with around 16 wholesalers and distributors. In Angola, it’s around 1,000.

• [00:46:21] Jitendra Upadhyay of Bonanza Portfolio asked about incremental revenue from new project.  Ashish Maheshwari MD said that it’s a backward integration project and from the new projects, revenue will increase but it will give more in terms of profitability and control over quality of BALAXI products.