Key highlights from Orchid Pharma Ltd (ORCHPHARMA) Q3 FY22 Earnings Concall
Q&A Highlights:
- Viraj Kacharia from Securities Investment asked about the DLL performance for the nine months of FY23 and comparison to previous year. Sunil Gupta CFO said that nine month EBITDA is INR10 crore and sale was INR300 crore.
- Viraj Kacharia of Securities Investment also asked about the capex of INR50 crores for biotech, chemicals and intermediaries and what are the products and size of these products. Mridul Dhanuka Director said that right now it’s only an exploratory one and there is no committed investment in biotech, nothing concrete on that front to say now.
- Nikhil Upadhyay with SIMPL asked that the company saw good growth in 3Q22 and if it was more price lead or demand lead. Mridul Dhanuka Director said that during 3Q22 the company has not been able to increase price, it’s largely due to increase in demand. In last two quarters, in Europe the demand was very much subdued. This demand increased in 3Q22.
- Himanshu Upadhyay from O3 Capital asked about the position of company versus competitor on the API business. Mridul Dhanuka Director replied that Dhanuka Labs cost competency is most efficient in terms of percentages. However, as it operates in the RoW markets there is cost pressure on margins. Additionally, process efficiencies are also high compared to competitors. There is also focus on some of the new Cephalosporin that only Dhanuka Labs has prominence in the market.
- Himanshu Upadhyay from O3 Capital also queried about the order book percentage growth QonQ and YoY. Mridul Dhanuka Director answered that based on the earlier guidance, the company would maintain 20% CAGR kind of number and the order book is in line with that number and hope to continue to grow that.
- Himanshu Upadhyay from O3 Capital also asked which are the largest molecules in Cephalosporin and the fastest growing products. Mridul Dhanuka Director replied that generally speaking most of the prominent large volume molecules, Dhanuka and Orchid combined would have percentage share between 20-35% depending on molecule volume.
- Tarang Agrawal of Old Bridge Capital asked how volumes have grown in 3Q22 on a YonY basis and nine month basis for Orchid and DLL. Mridul Dhanuka Director answered that the growth was entirely volume led. In 3Q22, the company did well by growing by 60%. For nine month, the number looks like 20% in Orchid. In DLL, on a volume basis it’s like 8-10%.
- Tarang Agrawal of Old Bridge Capital also enquired about raw material contribution. Mridul Dhanuka Director said most of those are materials that come from China, like fermentation products. And these products contribute to the total COGS depending on the product 70% of the COGS would come from these products in China.
- Viraj Parekh with Carnelian Asset Advisors enquired about performance of Non-Penicillin, Non-Cephalosporin (NPNC) segment in DLL for the nine months. Mridul Dhanuka Director said that out of the INR300 crores DLL did about INR100 crore of NPNC versus INR80 crores in last year same period.
- Viraj Parekh with Carnelian Asset Advisors asked about plant capacity utilization for 3Q22. Mridul Dhanuka Director replied that the company has tried to utilize the sterile capacities to the full in Orchid and looking at some investment to increase capacity by another 25%. In Dhanuka, the capacity utilization in NPNC has improved by 10%. Dhanuka Lab remains largely same or slightly reduced.
- Viraj Parekh with Carnelian Asset also asked how and when the company plans to reduce the promoter stake to 75% and is the sale of Orchid Tower expected to be completed in FY22. Mridul Dhanuka Director said it depends on how SEBI advises to do and there is time till 31 March, 2023. The intent is to do it once the merger is complete and well before the timeline. Orchid Tower, if not this quarter, by next quarter it will be sold.