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.