Categories Concall Highlights, Earnings, Health Care

Neuland Laboratories Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Neuland Laboratories Limited (NEULANDLAB) Q4 FY24 Earnings Concall

  • Financial Performance
    • Total income for FY ’24 was INR 1,511 crores, driven by high growth in the CMS business and better growth of the specialty PD business.
    • EBITDA for FY ’24 stood at INR 24.5 crores with a margin of 13.2%, an increase of 6.8% over the previous year.
    • Total income for Q4 FY ’24 was INR 29.4 crores, while EBITDA for Q4 FY ’24 stood at INR 14.2 crores with a margin of 28.7%, a decrease of 2.2% over Q4 of the previous year.
    • Profit after tax was INR 67.6 crores, compared to INR 84.5 crores in Q4 FY ’23.
  • Cost Optimization
    • The company continues to be mindful of managing operational costs, resulting in financial revenue.
    • This ability to grow without product cost sedation is attributed to the dedication to operational efficiency and cost optimization.
  • Debt and Capex
    • The company reduced its debt by INR 79.4 crores during the financial year.
    • Net debt position stands at negative INR 3.6 crores, indicating a strong financial position.
    • Invested INR 142.7 crores in capital expenditure during FY ’24, upgrading its facilities.
    • Generated a free cash flow of INR 1.4 crores in FY ’24.
    • Strategically optimizing operations and capital expenditure to maintain robust internal cash flow.
  • Growth and Product Mix
    • Neuland achieved over 30% growth in FY ’24, following 26% growth in FY ’23.
    • EBITDA margins also improved from 15% in FY ’22 to 23% in FY ’23 and further to 30% in FY ’24.
    • The CMS business contributed close to 50% of revenues in FY ’24, growing robustly.
    • The specialty GDS business grew, driven by molecules like Paliperidone, while there was a slight decline in Prime GDS.
    • Key molecules contributing to Prime GDS business were mirtazapine and escitalopram.
  • Capacity Expansion and Outlook
    • Actively investing in long-term growth capex, as announced during the year.
    • The company is creating additional capacities and capabilities to reach scale in new and existing molecules.
    • The company expects moderation in revenue growth and normalization of margins due to investments and input cost increases in the short run.
    • The long-term potential is exciting, led by commercialization of molecules and addition of new business.
    • The company expects FY ’25 to be a year of normalized revenue growth due to investments and input cost increases.
    • The company expects biotech funding and the biosecurity bill may boost revenue from early-stage projects.
    • Over a medium-term horizon of four to five years, the company targets a 20% growth CAGR.
    • The baseline capex guidance remains at INR 100 crores plus for FY ’25 and FY ’26.
    • The company aims to allocate no more than 60% of operating cash towards capex, but is willing to breach this benchmark based on available opportunities.
    • FY ’24 margins were better than expected, and the company expects some normalization in FY ’25.
  • Product Pipeline
    • NEULANDLAB saw a significant jump in the Phase II molecule pipeline during the current year.
    • The total number of projects/molecules has not grown much from FY ’20 to FY ’24 (76 in FY ’20 to 88 in FY ’24) compared to the preceding two years.
    • The company is focused on both the number of projects and the quality of projects, aiming for high-value opportunities.
    • New project inflows were impacted by the biotech funding crunch a year ago, but a steady increase in new opportunities and RFPs is now being observed.
  • Peptide Pipeline
    • The company expects to file one peptide molecule’s DMF in calendar year 2024, which is on track.
    • Another GLP-1 peptide molecule’s DMF filing is expected in 2026, presenting a significant opportunity, especially in the generic space.
    • The company continues to see increased interest from generic customers for peptide molecules.
  • GLP-1 Opportunity
    • The GLP-1 CDMO opportunity is limited as innovators are securing their own API supply chains.
    • GLP-1 peptides are expected to have higher volumes, requiring significant infrastructure and capacity planning.
    • Some unpredictability exists around the IP landscape and innovators’ strategies for GLP-1 products.
    • Opportunities may also arise for fragments and building blocks of GLP-1 peptides on the CDMO side.
  • Biosecurity Act
    • The current status of the proposed Biosecurity Act in the U.S. is uncertain.
    • The narrative around the Biosecurity Act is favorable, leading to increased conversations and interest from American companies towards Neuland and other CDMOs.
    • The company is waiting to see if this translates into actual business opportunities.
  • Commercialized API Growth
    • The company has not lost any customers in the past, and its custom manufacturing customers’ patents will not expire until 2030.
    • NEULAND clarified that while it has built a portfolio of 18 commercialized API/intermediates, the key molecules contributing substantially to commercial revenues are around 4-5.
    • Expects the count of commercialized APIs to grow gradually, but providing specific quarter-on-quarter guidance is challenging.

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