Supriya Lifescience Ltd (SUPRIYA) Q3 FY23 Earnings Concall Transcript

Supriya Lifescience Ltd (NSE:SUPRIYA) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Satish Wagh — Chairman and Managing Director

Saloni Wagh — Director

Krishna Raghunathan — Chief Financial Officer

Analysts:

Rasika Sawant — Orient Capital — Analyst

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Yogesh Tiwari — Arihant Capital Markets — Analyst

Naresh Vaswani — Sameeksha Capital — Analyst

Avnish Khara — VT Capital — Analyst

Shashank — Crescentia — Analyst

Jagvir Singh — Shade Capital — Analyst

Tushar Bohra — MK Ventures — Analyst

Abhishek — Padmaja Investments — Analyst

Siddharth Purohit — InvesQ Investment Advisors — Analyst

Karan Asli — Maximal Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 and Nine Months FY23 Earnings Conference Call of Supriya Lifescience Limited. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Rasika Sawant from Orient Capital. Thank you, and over to you ma’am.

Rasika Sawant — Orient Capital — Analyst

Thank you, and welcome to the Q3 and nine-month FY23 earnings conference call of Supriya Lifescience Limited. Today on this call, we have Dr. Satish Wagh, Chairman and Managing Director of Supriya Lifescience Limited along with senior management team. This conference may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

A detailed safe harbor statement is given on page number two of investor presentation — presentation of the company, which has been uploaded on the stock exchange and company’s website as well.

With this, I now hand over the call to Dr. Satish Wagh for his opening remarks. Over to you, sir.

Satish Wagh — Chairman and Managing Director

Good morning, and warm welcome to all the participants. Thank you for joining us today to discuss the Q3 and 9M financial year ’23 results of Supriya Lifescience Limited. To take us through the results and to answer your questions, we have with us the top management from Supriya, represented by Dr. Saloni Wagh, Director; Mr. Krishna Raghunathan, the Chief Financial Officer of Supriya Lifescience Limited; and our Investor Relations Partner, Orient Capital.

I hope everyone got the opportunity to go through the financial results and investor presentation, which have been uploaded on the stock exchanges, as well as the company website. Before we discuss the business performance, I would like to brief you a few development at Supriya Lifescience. I’m happy to report that the Board has appointed Mr. Krishna Raghunathan as Chief Financial Officer of the company. He’s a dynamic professional and qualified chartered accountant having more than two decades of the rich experience with an excellent track record in departments like finance, treasury and investor relations. Krishna has a demonstrated history of working in diverse industries, including pharmaceutical, packaging and information technology, these seasoned pharma specialists is more than two decades of experience in the companies like Dr. Reddy’s Laboratories Limited and Granules India Limited. His appointment is in line with the company’s strategy to achieve accelerated growth in the years to come. We welcome him into Supriya Lifescience family and wish him all the success in his role.

Let me now share some key highlights for the quarter, nine months ended financial year ’23. As you all know, it has been a challenging quarter for the global economy and our industry has been no exception. Due to continuous challenges posed by the lockdown in the major cities in China, the drop in demand of new products has led to pressure on top line and profitability of quarter under review.

However, our endeavor is to navigate these challenges and focusing on taking adequate measures to minimize the impact on our business. Our primary focus remains on expanding our regulatory market presence with new emerging markets, backward integration and manufacturing capacity optimization. For nine months ended financial year 2023, our operating revenue was INR319 crores as against the INR342 crores in nine months financial year 2022 with an EBITDA of margin 23.2 and PAT margin of this 16.2%. Our operating revenue in Q3 financial year was INR100 crores [Phonetic] as against INR17. crores in Q3 financial year 2022, a growth of 10% on year-on-year basis.

With this, I now hand over the call on Dr. Saloni Wagh to share the key highlights of our business performance. Over to you, Dr. Saloni.

Saloni Wagh — Director

Thank you, and good morning to all the participants. We welcome you to the Q3 FY ’23 and nine months FY ’23 earnings call of Supriya Lifescience Ltd. I would like to share an update on developments and performance of the quarter under review. As informed by our CMD Dr. Wagh, we have had a challenging quarter. We have a leadership position in antihistamine range. And for this China is one of our largest market. As this product ranges a mature range for the company and already in regulated markets, the revenue and margin contribution of the same is high.

It has been a severe outbreak of COVID in China for the past several months, we have been transparent about lockdown situation and have continuously communicated the supply challenges we have been facing. Due to the extended lockdowns and widespread use of masks and sanitizers, the demand for the antihistamine range of products has gone down significantly.

We are facing demand and pricing pressure from this market. The situation in China remains grim and we anticipate a similar trend in the coming quarters before it starts to improve.

Other markets and therapeutic categories continue to be stable. However, as we operate predominantly in export market and there are long holidays in December, the sales get pushed to the last quarter. Hence for other therapies and regions we have not seen any sales below.

Considering our current situation, we have already been working on the de risking strategy to mitigate the impact of our dependence on a particular product and or or geographies. We have enhanced our capacities and initiated registration for other therapies such as decongestion, antihypertensive Anti-Asthmatic, vitamins and anti-allergic. These therapies have good volume potential in regulated markets. We anticipate that these will start seeing a good traction in regulated markets in the next two quarters, which will help stabilize our portfolio instead of the situation in China does not improve the [indecipherable].

Additionally, we are in the advanced stages of discussion for two CMO opportunities and getting multiple inquiries which we believe will start contributing to our top line and bottom line from Q3 of FY ’24. We are also evaluating new products in our R&D pipeline to increase our product basket and therapy exposure.

Furthermore, we are strengthening our senior management team to enhance our business development, manufacturing and R&D capabilities with the aim of creating a more robust business model.

Talking about our facility upgradation work, for capacity enhancement our E block which will add 350 KL capacity, work is going on and we expect it to be operational by Q4 of FY ’24. Our admin building at our Lote site with the new R&D Center, QC and finished goods warehouse will be operational by Q4 FY ’23. R&D facility with pilot plant expansion activity at Lote site in Ambernath is going well in time.

Lastly, I would like to touch upon companies backward integration business models. The top 12 products which we produce contribute to 72% of our total revenue. We are extending the backward integration model to our newer products as well to stay competitive, by adding more products, geographies, increased penetration in regulated markets, expanding our customer base, adding more operating sites, we are completely de-risking the business, a stepping stone to our success stories.

We are confident of our de-risking strategies and other initiatives that will help us recover our top line and improve margin profile in the quarters to come. Overall company’s growth strategy of doubling the top line by FY 2026 remains the same with a healthy and sustainable margins.

With this, I will now hand over this call to our CFO, Mr. Krishna Raghunathan. Over to you Krishna.

Krishna Raghunathan — Chief Financial Officer

Thank you Dr. Saloni. At the outset I would like to thank Dr. Wagh for the introduction. And I’m excited to join Supriya Lifescience Limited, and be a part of such a talented and dedicated team and looking forward to contributing to the growth and success of the company, and to being a part of the exciting future that lies ahead.

Let me share the highlights of our financial performance for the nine months and Q3 FY 2023 and following which we will open the floor for questions-and-answers. Company reported revenue from operations of INR105 cores in Q3 FY 2023 as against rupees INR117 crores in Q3 FY 2022 and INR319 crores in nine months FY 2023 as against INR342 crores in nine months FY 2022.EBITDA in Q3 FY 2023 stood at INR14 crores as against INR38 crores in Q3 FY 2022 and INR74 crores in nine months ended FY 2023 as against rupees INR132 crores in nine months FY 2022.

EBITDA margin stood at 13.4% in Q3 FY 2023 as against 33% in the same period last year. and 23.2% in nine months FY 2023, as against INR38.6 in nine months FY 2022.Profit before tax was at INR12.6 crores for Q3 FT 2023 and INR17.2 crores for nine months FY 2023. PAT stood at INR9.5 crores for Q3 FY 2023 and INR52 crores for nine months FY 2023.

Operating revenue has remained similar in the nine months FY 2022 and 2023 despite muted customer response in our key market, which is China. However, since this market is a key margin generator, there has been a dip in our margin. Also, we have not seen any major cost pressure on raw materials, logistics challenges which we had faced in the earlier quarters have eased out.On the expense front, there has been an increase in certain expenses like power, employee benefits and certain increase in repairs and maintenance, which are in line with our business strategy.

And this is all from my side we can now open the floor for question and answers. Thanks to all of you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Aashish Upganlawar from InvesQ Investment Advisors. Please go ahead.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Yeah. Hi. Thanks for this opportunity. So, if we go through the past four or five quarters that Supriya has been listed, and basically, arranging these calls and we’ve been interacting with you. So the entire entire commentary that has been there from the management, if I recall, it used to be INR750 crores of top line as a target into three hours and then sustainable margin of 30% 35% and all those things.

And we’re if I have to look at it, going back in past 12 months, everything has kind of deteriorated to an extent where the commentary does not stand anything, usually, whatever have been told to the investors. So the entire management team has changed. I don’t know for what reason, the CEO change, the CFO change then there is — then all these numbers.

I mean, last quarter, you were saying that in China logistical challenges were there, now you’re saying that there is no demand. So I mean, as investors, how are we supposed to join all these dots? I mean, being in business for two, three decades. I mean, these cycles typically tend to be known to the management, how sustainable are the margins and stuff. So your comments on this will be helpful and we will need some bit of doing on your part to ensure that we keep trust in, whatever is told to us basically so your comments on this will be helpful sir.

Saloni Wagh — Director

So thank you for your question. See, in terms of the last couple of quarter’s performance. Since this year, financial year began, the major issues we have seen in the last three quarters. And we have actually been very transparent throughout all our interactions with investors, earnings calls that we are facing logistics issues in China because of the continued lockdown. So this is something we’ve been very transparent about.

Now, what has happened is, that because of the continued lockdown and because of the widespread use of hand sanitizers, masks, people are not going out of their homes, the demand itself for antihistamine range has dropped down significantly. So this is a result of the continued lockdown which has been going on for over three months. So that is one of the major impacts that we have faced

And this is why in this quarter, we are saying that, yes, we are now facing a demand drop because of this continued lockdown situation in China. And what I would like to also highlight is in the past also we have said that the company has a leadership position in three molecules out of the 38 molecule portfolio that we have. These three molecules have moved into the regulated market phase, they are very mature molecules of the company, and their contribution to our top line as well as our bottom line is very significant.

Unfortunately for us because of the situation in China, one of our key markets and key products has been badly impacted. If you look at the other therapies they have performed well, the growth in those therapies is quite stable. But because currently the dependence on this particular therapy and market of the company is high, the impact on the top line and the bottom line is visibly quite significant.

I don’t think, even now the strategy for the company has changed, we still maintain that the company will continue to show good growth in the next couple of quarters. For this, what we have done is, we have already identified a group of five, six products, which we have now fast tracked into the regulated market space. These molecules have very good volume potential, so they can add quite significantly to our top line and give us a decent margin as well. So once these molecules start maturing into the regulated market, in the span of next two to three quarters, you will see that the portfolio would have been significantly derisked.

So whatever comments we have made in the past that you know, we are looking at doubling the top line in the next three years, we still stand by those comments. We also have a lot of CMO opportunities, which are at advanced stages. In fact, two of them have gone through the signing stage. And we expect to see some revenue generation from the quarter three of next year.

So, yes, we have identified the risk at our site. And it is a risk, which all the — we have been very vocal about with all the investors and everyone in the past as well. And now we are putting our best efforts to try to mitigate that risk. So we are committed to showing growth in the next couple of quarters.

And as far as the senior management team getting changed is concerned, we have also addressed this in the past, but I would still like to take this opportunity to address this. The CEO, due to some personal reasons, family reasons, he had to step down. He still continues to be with the company very much. He’s our technical lead. It is not like he has left and taken some other job opportunities. So he’s still very much a part of Supriya.

And now with Krishna joining us, in fact, we have strengthened our finance side. He has a much wider experience and exposure to the pharmaceutical sector for over 20 years and has been part of listed company.

So, in fact, I would say that, on the finance part, we have strengthened our team. And we continue to strengthen our team further, we have identified areas like R&D, manufacturing, and technical areas where we would like to further strengthen our team. So you will hear so much very soon on that front as well.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

So what is the outlook on margins? And related to that is, how much China proportion is there on the top line and margin front? If you can be a bit more clear on that, it will help us understand how the numbers can shape up from here. And what’s your outlook on the margin, actually, that will help us.

Satish Wagh — Chairman and Managing Director

See, at this point, we are not giving any sort of commentary on margins. And also, we are not giving any sort of guidance for future. But we believe that we will be in a steady state from now on.

I think, that is something which I can always say, but we would like to, what do you call, perform for the next couple of quarters before giving any sort of guidance at this stage? Okay? We are not guiding anything at this stage. We’ll be waiting and watching for the next couple of quarters. I think we will let the performance speak, sir.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

But what is the stable state 30% margin that you reported this quarter or 2025, 30% that has been coming in the las?

Satish Wagh — Chairman and Managing Director

It would be around, what do you call, a late or early 30s, I would say. But please don’t take this as a guidance. We are working on improving all of this further also. But at this point in time, you can say that around the — around 30-ish would be a steady state in future.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

So this is, we’re talking about the next two three quarters, or we’re talking two years down the line or one year down the —

Satish Wagh — Chairman and Managing Director

No, it would be for the next couple of quarters. But we can always — see, there is always a scope for improvement further. As of now, whatever we are seeing looking at the Chinese situation, this is what we believe would be the number at this stage. But we expect a quarter on quarter improvement going forward.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

The other part I asked was, the China proportion to sales and margin.

Operator

I’m sorry for interrupting, sir.

Krishna Raghunathan — Chief Financial Officer

This is very important, because we have been investors and there are many people who have kind of had a bad experience till now. So, I think, rather than a time limit, it would be better if you could answer all those questions.

Operator

Sir, may I request rejoin the queue, because we have participants waiting for their turn.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Sure. Okay.

Operator

Thank you. The next question is from the line of Yogesh Tiwari from Arihant Capital Markets. Please, go ahead.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yes. Good morning, sir. Am I audible?

Saloni Wagh — Director

Yes.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yes. So my first question is are you seeing any pricing dropping at CPM and what will be the quantum approximately single-digit double-digit?

Saloni Wagh — Director

So, while we’ll not be able to share this information on the quantum, but yes, we are seeing because, see what has happened is because like I mentioned in my speeches well because of the continued lockdown, the demand has dropped and in the demand drop, there is definitely a pressure on the pricing as well So, we are seeing a price and demand pressure from Chinese market on CPM.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And what could be the seasonality for CPM like, which are the main quarters for this product?

Saloni Wagh — Director

Usually quarter two and quarter four are typically the highest sales in terms of CPM. But because of the lockdown, which was there in China during quarter two, we did not see that kind of impact. But if you look at the revenue generation and if you look at the region-wise contribution, you will see that in terms of volume, we have been able to sell CPM into the other markets like Southeast Asian markets like Indonesia, Malaysia, Vietnam. So, there we have seen good volume pickup.

So, in terms of volume, you might not see a large drop. But because one particular market has been impacted, and that market volume and price typically contribute very largely to the revenue and bottom-line, that’s why you’re able to see the hit in the P&L as well.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And madam regarding the gross margin, so it has been all over the place, like from 60% to now we’re like, approximately 31%. So, if we take a base of FY 2026, where we doubled the revenue, what would be the range for the gross margin — target range for the company, if you can get a range for about 2026.

Krishna Raghunathan — Chief Financial Officer

At this point, it is too premature to talk about margins in FY 2026. I think let us crop this financial year. And in future, I think when we believe that we could give some sort of a guidance, we will certainly guide the market. We have not shirking away from anything, but since these are all what do you call a one-off sort of issues which had happened, which the company hadn’t seen in the earlier instance. So, please also understand that we don’t want to get such a long-term, but it will be a very, very healthy margin. That is something which the entire senior management is working upon sir.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Sir last — because what will be the margins for — do you believe these margins have bottomed out for this — in this quarter?

Krishna Raghunathan — Chief Financial Officer

Sir, we don’t want to give any sort of guidance. But yes, I would certainly say that this would be one of the lowest performances yet. I don’t think it should be anything going way below this is what we also believe in.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Thank you sir.

Saloni Wagh — Director

Thank you. I would like to reiterate what Krishna said I think this is the lowest what has happened. And we don’t see it dipping from this anywhere.

Yogesh Tiwari — Arihant Capital Markets — Analyst

May I ask one more question if possible? Hello.

Krishna Raghunathan — Chief Financial Officer

Please go ahead.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yes. What is the demand scenario for ketamine in Europe? Are we seeing any strong traction there?

Saloni Wagh — Director

Yes.

Krishna Raghunathan — Chief Financial Officer

So, we don’t comment on my product specific stuff, sir because these are all our important products. I think it would be very, very improper for us to guide about the single molecule in a call. I think if something if you can always call me personally, I think we can have a chat on this. It will be a bit inappropriate for us to talk about individual product margins at the stage, because these are all our confidential and important molecules. And we would not like to share the demand as well as the margins in an open forum please.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Sure, sir. Sure. Sure. And lastly like what was the sharp spike in other expenses, so what will be the component leading to that increase in our expenses for the quarter?

Satish Wagh — Chairman and Managing Director

Basically what had happened is, of course, one was on a very good side the CPHA started so the last quarter we had some expenditure on CPHA. So that is one of the marketing side, of course, a bit of power and fuel and we had to maintain a couple of reactors on the plant side. So these were some of the expenditures which have gone up of course, employee benefits also have gone up a bit, which of course, we have already said in our speech due all the new personal joining in. So these are some of the areas where we have seen, but we do expect a bit of a reduction on the repairs and maintenance going forward, but nothing significant is going to reduce.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Thank you, sir. That’s all for my side. Thank you.

Operator

Thank you. The next question is from the line of Naresh Vaswani from Sameeksha Capital. Please go ahead.

Naresh Vaswani — Sameeksha Capital — Analyst

So, first question is on the China market. Can you hear me?

Operator

Yes.

Naresh Vaswani — Sameeksha Capital — Analyst

Yes. So, while you mentioned that because lockdown demand gone downwards, what we saw in India as well post the reopening demand came back much stronger. And now since we are hearing China has opened up, why are we not seeing our demand recovering in the China for the CPM?

Saloni Wagh — Director

So, like I’ve said in my speech as well as I explained before, what has happened is that because of the extended lockdown and widespread use of masks and sanitizers, and there was a very strict lockdown, so people were not leaving their houses, there was no flu, like the common flu, cough cold had gone down significantly. So, of course, when a scenario like this happens, it will have an impact on the demand. So, that is why once things have opened up, what we are trying — what we are understanding from the — our contacts in the market is that because of this extended lockdown situation, the demand for the product itself has gone down. Its not a permanent situation, but what we understand from them is that this situation will persist at least for the next couple of quarters for a market to recover, it will not be very immediate, it will take a couple of quarters for the demand to stabilized back to what it was earlier.

Naresh Vaswani — Sameeksha Capital — Analyst

All right. So, that means there is some stock in still there in the market, which would get utilize in post that you might see recovery in the demand, right?

Saloni Wagh — Director

Yes. Yes. We anticipate at least in the next two, three quarters similar situation would be there. But it will keep stabilizing post that is when we actually think that the market would be in a position to recover.

Naresh Vaswani — Sameeksha Capital — Analyst

Right. And you mentioned that there are four to five products which will start to go into regulated markets and that will start to contribute in the next two, three quarters. So, can you help us understand which of these products and what would be the contribution of these products in next, let’s say, two, three quarters?

Saloni Wagh — Director

So, while I can’t talk specific product names, but the therapeutic categories, yes. So, we have some products from anti-hypertensive range, in the anaesthetic range itself, we have another product where we are seeing good traction in North American markets. And the asthmatic vitamins also we are working on some large CMO opportunities with the innovator where we can see a very large volume scale up. Then decongestant is another category of products, wherein we are completing the registrations in U.S. and in Europe. We are expecting to get the US DNS number in quarter two of next year.

So, these are some of the therapies wherein — for the product, the volume demand is quite large, and the margin profile is also quite decent. So, once these products and these regulatory approvals start coming in, like I said, from quarter three of FY ’24, we should be able to start seeing good revenue generation from these products. But the specific number on how much revenue and which products unfortunately, I will not be able to discuss in this forum. But these are just some of the therapies that we have already identified and we have been working in the last couple —

Naresh Vaswani — Sameeksha Capital — Analyst

Hi, am I audible? Hello?

Saloni Wagh — Director

Yes.

Satish Wagh — Chairman and Managing Director

You’re audible. Yes, please.

Naresh Vaswani — Sameeksha Capital — Analyst

Okay. So — but what I was trying to understand is, will this take a longer time to materialize or you already have the registration in place and you have — you’re starting to get some orders on these products? So like — will it be like one year down the line thing or do you foresee it faster?

Saloni Wagh — Director

It could be faster, because for some of these products, some registrations have already started coming through. We are working on some specific projects with certain customers wherein the customers have already bought the validation volume. So, we are waiting for them to come back to us on the commercial requirements. So it would definitely be faster than one.

Naresh Vaswani — Sameeksha Capital — Analyst

And your guidance on doubling the revenue was on the base of FY — to right by ’26.

Saloni Wagh — Director

By ’27.

Naresh Vaswani — Sameeksha Capital — Analyst

Yes. That doubling of revenue was on the base of FY ’22’s revenues?

Saloni Wagh — Director

FY ’23 revenues.

Naresh Vaswani — Sameeksha Capital — Analyst

Okay. And one last question. So on this, two cmo projects, where we’re close to finalizing the terms, what would be the size of this project? If you can comment on that and which therapies will these belong to?

Saloni Wagh — Director

So, while I can talk about the size of the project, but definitely these would be diversifying our portfolio further. This will be more on the advanced intermediate side of the products. It would not be API-centric. So definitely, you might be further make our portfolio more robust and make it more derisk, I would say. But you — in the next coming few months itself, you can wait for some positive announcements from our side on these front.

Naresh Vaswani — Sameeksha Capital — Analyst

Okay. Tthank you.

Operator

Thank you. The next question is from the line of Avnish Khara from VT Capital. Please go ahead.

Avnish Khara — VT Capital — Analyst

Hello. Am I audible?

Operator

Yes, yes.

Avnish Khara — VT Capital — Analyst

Hi. Thank you for taking my question. So my first question is on the China market. So I just wanted to get a sense of what is a right to remain in the China market? Is it better compliance or some sort of technical excellence that we haven’t addressed that we manufacture for them? Because I think it’s a core market for us and it’s a large high margin market as well, if you can guess or give us some color on that?

Operator

Mr. Avnish, I’m sorry to interrupt but your voice is sounding muffle, sir. We are unable to hear you clearly. Can you please repeat your question?

Saloni Wagh — Director

So I was able to hear this question, if I can answer.

Operator

Sure. Please go ahead.

Saloni Wagh — Director

So, yes, the China market, we have both on the science side as well as on the quality side. In terms of companies, we are the only registered foreign source with NMPA, which is the Chinese Regulatory Authority for this product. We are also the only manufacturer to have the NMPA site approval we are audited and approved by them. There is a quality of material that we produced for the China market, they don’t follow the normal monographs, they have their own Chinese monographs, wherein the impurity levels are far more stringent as compared to any other monograph. They also have very specific requirements when it comes to the infrastructure, when it comes to the GMP compliance at intermediate level also, for which we have invested in our site and we have created that infrastructure.

Because of all these things, we have been able to get a premium price in that market. And that will continue once the situation stabilizes in that market. So it is both a combination of the quality we supplied to that market as well as the regulatory compliance that we have.

Avnish Khara — VT Capital — Analyst

Got it. Got it. Also on the — I think if I look at your geographical numbers, then I mean, US has become, it’s slowly I can see a slight uptick over there. So you’re talking about future growth. So, I mean, is it safe to assume that US will be a key focus market for you going forward? And if we could also help us understand what are the other markets you will be focusing on where the growth for our new products will come from?

Saloni Wagh — Director

Yes. Like you very rightly mentioned, we have seen some increase in the North American market. And this is because we are getting good traction for some of our existing products there. When we talk about the growth in market will contribute largely to this growth, because some of the other therapeutic category molecule which I discussed previously, we see a very large market in North America. So, definitely as the next couple of quarters progress, you will see more contribution from North American markets, still continues to be one of our largest regulated markets, even if you look at numbers of quarter three, the only impact which has happened is because of the long holidays, which happened in December month, and we are unable to ship during this entire month. So whatever sales we were not able to do has been impacted. So as such we have not any sales loss for the Europe market as well. So the situation there also is stable.

And going forward, one of these other therapies regulatory approvals start coming. Europe, North American market, Latin American markets, would be the larger contributors in regulated markets space.

Avnish Khara — VT Capital — Analyst

All right. And I just have one last question. There was some sort of, I think there was a debottlenecking done in Blocks A and B. So how much of you know improvement did that lead to? And what current utilization levels are you at on a consolidated basis?

Saloni Wagh — Director

So on a consolidated basis the current utilization is about 72 —

Operator

Sorry to interrupt Ms. Wagh, that your voice is breaking ma’am.

Saloni Wagh — Director

I think so the other mute themselves, because there is a lot of background noise, which is where. Are you able to hear me now?

Operator

Yes, please go ahead.

Saloni Wagh — Director

So I was saying that, yes, currently, the consolidated capacity utilization is at 72% and the debottlenecking has definitely helped increase the volumes of certain individual products, wherein we were not able to get the larger model. But overall, we are at 72% currently.

Avnish Khara — VT Capital — Analyst

That’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Shashank [Phonetic] from Crescentia [Phonetic]. Please go ahead.

Shashank — Crescentia — Analyst

Yeah. Are you able to hear me?

Saloni Wagh — Director

Yes.

Krishna Raghunathan — Chief Financial Officer

Yeah.

Shashank — Crescentia — Analyst

Sir, my first question is, after the investor wellbeing eroded, are you sticking to a capex, which you have planned and you’re published in your previous con calls, or is there a change in the capex in terms of reduction of capex? That’s my first question.

Krishna Raghunathan — Chief Financial Officer

If you’re pursuing overall, or you’re having any continuous question, sir?

Shashank — Crescentia — Analyst

My second question is that in slide number seven of the investor presentation, where do you see the EHS contributing 50% of your total Q3 sales, but for the last 15, 20 minutes, you were saying China is not contributing and that is the one major reason. But if — from 29% it is going to 50%, that means Asia, and in which China is a major portion is contributing. So I want to understand, am I reading a wrong data? or is it something else? That’s my two questions.

Krishna Raghunathan — Chief Financial Officer

Sir, you’re reading the data in the other way around. I think, see, nine months FY ’22 is 50% and nine months FY ’23 is 42%. And what has happened is in China, the margins are pretty, pretty high. But we were able to cover most of the sales. That is why if you see, we haven’t see much of a reduction on the top line, if you look at our top line, we haven’t lost much. But most of it had come and hit the margins. So whatever you are seeing nine months FY ’23 highlights, whatever it is, it is based on, what do you call, my top line numbers, my top line numbers I haven’t lost much. So it is only that I had sold much in other Asian territories, like what Dr. Saloni has already said about, okay.

And with respect to capex, specifically, see some of these capex is like Module E, and certain other stuff, which we had already committed during IPO times is what we are carrying forward. And I don’t think there is any change in any of our thought process in that.

So that is happening accordingly. I don’t see any reason for us to stop, and looking at our expanded portfolio, which Dr. Saloni has just specified. We believe that our revenues are only going to grow north, and we don’t see it as a major problem, see whatever that has happened in this quarter is just an aberration. And it is not something, which is very prominent.

Shashank — Crescentia — Analyst

Yeah, but — can you hear me now?

Saloni Wagh — Director

Yes.

Shashank — Crescentia — Analyst

Yeah. Because I was referring to Q3 in specific only slide number seven. I’m not talking of nine months.

Saloni Wagh — Director

Sir, yes, you are right, like Krishna explained, and I have also explained this, when I was answering about China, what has happened is when we consider Asia, we also consider all of the Southeast Asian countries. So in countries such as Indonesia, Vietnam, Malaysia, some parts of Middle East, we have seen a good nice volume growth.

So like he rightly said that in terms of volume, there is not major dip, because we were able to compensate through some of these other Southeast Asian markets. That’s why overall, if you see the Asia revenue generation has not dipped at all, but what impact the China situation has caused is on the margin front, and yes, also on the top line, if the China revenue would have been generated, our top line as well as our bottom line would have been significantly higher, but they have been able to get the volume from some of these other Southeast Asian markets. And that’s the reason why overall, there is no dip in terms of regeneration from Asia.

And on the capex — see most of this capex is driven from capacity enhancements, without which the further growth in the portfolio cannot — so capex remains the same, we are continuing with that, because the doubling of the top line will only happen if we have a larger capacity for some of these other molecules in the portfolio to grow. And we are going to see a very good fraction of these in regulated markets, and we will need that capacity.

Shashank — Crescentia — Analyst

Great. That’s it for my side.

Operator

Thank you. The next question is from the line of Jagvir Singh from Shade Capital. Please go ahead.

Jagvir Singh — Shade Capital — Analyst

Yes, thanks for the opportunity. So I want to know, what is the percentage of revenue we derived from the China in the last nine months?

Satish Wagh — Chairman and Managing Director

Sir, our CFO will answer but let me tell you something on China, because some predictions its wrong at the end. See, China, whatever CPM we were selling, is not the major consumption of China, Chinese has got a lot of big variants of tablets and capsules making combination which will cater all over the world. And for that, this is a GMP audited site only from India. That is why the purchase was taking place. And that too also from the beginning with limited quantity that we must understand it was told to us, if we do that, suppose demand is 300 tonnes. And you will feel that I should export 150 tonnes, not possible at all.

Otherwise, there’s going to be a hick of the anti dumping duty from China, which today we are also doing from our aid. This was the thing, which was from the beginning, when we registered the product, it was told to us, you cannot continue to save as much as you want, you have a restriction of the quantity. If you exceed, anti dumping is expected on you, and then you lose the business. This is what I would like to inform you all. This is the type of business in China.

Krishna Raghunathan — Chief Financial Officer

And to add to Dr. Wagh, what I said, see, basically Chinese revenues are — it’s a very, very significant number, see we don’t want to answer very specifically with respect to China on the percentages. But it is a very, very large chunk plus also a great margin contributor for us.

So by not having Chinese sales, we had lost ground on the margins. That is what I think the whole commentary is all about in this quarter. So if we are able to recoup the sales as well as the margins, I think our businesses would be skyrocketing. That is how I can put it. I don’t want to use any other adjectives beyond this meeting a conference call, I think but if you could come one on one, I think I could explain this further.

Jagvir Singh — Shade Capital — Analyst

And sir, my next question regarding 15 days is already gone in this quarter. So what is the ground situation right now? So I’m not asking for any guidance, I just wanted to know. So we may see some improvement in the margins and the top line in this Q4 over Q3?

Krishna Raghunathan — Chief Financial Officer

Sir, we don’t want to guide anything for the market. But there should be a better performance when compared to Q3. We would like the results to speak for itself, sir. We don’t want to unnecessarily guide the market. And we don’t want to write any sort of an expectation with the people. But, yes, having said that, the performance of Q4 would be comparatively and far, far better than Q3, sir.

Jagvir Singh — Shade Capital — Analyst

But Q4 seasonally always higher for the Supriya na?

Saloni Wagh — Director

Correct. Correct. Its seasonally also higher and like Krishna said that definitely our performance of Q4 would be better than Q3 performance.

Jagvir Singh — Shade Capital — Analyst

No. So it would be better than because of that Q4 is seasonally higher or there is some improvement in the — because 15 days already gone. So I just want to understand. So there is any improvement in China part also not on the ground?

Saloni Wagh — Director

No, the China situation will continue [Technical Issues] earlier also. The China situation would remain the same at least for the next couple of quarters. However, some of the other therapeutic category products, you know, we have 38 products in our portfolio. And while some of the other products might not be very high in terms of margin contribution, we have seen good traction for these products in some of our regulated market. So, that is the reason why we are confident that it would be better because these product contribution would be seen in quarter four of this year.

Jagvir Singh — Shade Capital — Analyst

So, only last question I have..

Operator

May you..

Jagvir Singh — Shade Capital — Analyst

Only last question, Ma’am. Only last question.

Saloni Wagh — Director

Sure. Sure. Please go ahead. Please go ahead.

Jagvir Singh — Shade Capital — Analyst

Ma’am, I just want to understand that if suppose in the Q4 next year, in the first half of the Q4, given Chinese situation does not recover. So, in the — from the other markets, we can make the losses in that Chinese market in so we can make in these losses in other markets?

Saloni Wagh — Director

Correct. So to, you know, compensate for the margin contribution that China was giving immediately would be very difficult, because, you know, the number is significant. But like I said, we’re working on a risk mitigation strategies. So probably three, four quarters down the line, yes, we would be in a very strong position that even if the China situation remains, as is some of the other products would have matured into the regulated market space. And we would still be able to normalize our margins as well as our revenue, but it would take at least a couple of more quarters for this situation to streamline.

Jagvir Singh — Shade Capital — Analyst

Okay. Thanks a lot, ma’am.

Saloni Wagh — Director

Thank you.

Operator

Thank you. The next question is from the line of Tushar Bohra from MK Ventures. Please go ahead.

Tushar Bohra — MK Ventures — Analyst

Yes. Thanks for the opportunity. So my first question is, just to understand this better. We had — we have some products in Q3 in Europe, which we have not been able to sell. We believe its got deferred Q4 right?

Saloni Wagh — Director

Yes.

Tushar Bohra — MK Ventures — Analyst

So would these products be on a cumulative aggregate basis, the higher margin contributors to the average. So I’m taking 30% now as a benchmark as given on this call. Is it fair to say that A, the, you know, the dip in Europe, contribution in sales this quarter, is because of this deferment? And in Q4, once these products come in, we should expect better revenue as well as margin contribution?

Saloni Wagh — Director

Absolutely, yes. Like I said, in my speech as well the sales dip in Europe is not because of any sales loss. It is only that the sales has been pushed into the quarter four because of the long haul. In most of the export markets, actually, once this shipment goes through, like I said before as well quarter four performance would be better in terms of revenue also and in terms of margins as well as compared to quarter three.

Tushar Bohra — MK Ventures — Analyst

Would you be able to quantify or give some sense of how much revenue are we talking that has potentially got deferred?

Saloni Wagh — Director

That is something that, you know, we should –we’ll not be in a position to share on this particular, you know, platform, but we’re happy to talk in detail separately, but in this platform, it would be very difficult to give any specific number.

Tushar Bohra — MK Ventures — Analyst

But would it be safe to assume that against the average run rate of about close to INR100 crore to INR110 crore for the last three quarters, should we therefore expect significantly higher traction in the coming quarters?

Satish Wagh — Chairman and Managing Director

Of course Tushar, we will see a better Q4. I think that is what we can say at this point in time. Yeah, it would be comparatively far, far better than the Q3.

Tushar Bohra — MK Ventures — Analyst

Sure. My second question is, if you can help understand the, the new CMO opportunities a bit better, including the ones with which you are saying that I’ve sort of progressed, as well as on some of the others, if we can have some qualitative highlights and also the milestones are next — what we should look forward to.

Saloni Wagh — Director

Yes, so, in the CMO opportunities at the moment, we have eight, nine concrete CMO opportunities. Most of these are wearing we would be manufacturing certain advanced intermediates for multinational companies, wherein the initial agreement has been signed and now we are in the process of a tech transfer. Some of the CMO opportunities are also AI centric, where we will be partnering with the innovator and we will be supplying the entire requirement from our PMP approved site. So two three projects are of this nature as well.

And then we have some CMO opportunities, which are away from API and intermediates into more nutraceutical sectors. So that would also definitely help in derisking our portfolio in terms of how they are progressing. Most of them like I said are concrete opportunities when the initial agreements have been signed, they are currently in the process of tech transfer and technical information exchange. Two of these have moved to a very advanced stage. And like I mentioned in my speeches, whether three of FY ’24, we should be able to share, we should be able to see some revenue contribution from these two opportunities. In the next coming months, we would be in a better position to give more concrete information and make announcements of these CMO opportunities.

Tushar Bohra — MK Ventures — Analyst

Thanks. And finally, on the new products, that that are being discussed in regulatory market, so we should expect some more of products to start getting sold in regulatory markets in this financial year or other in FY ’24. And what kind of margin profile are we expecting for these products, would it be in line with a higher than the 30% guidance that sort of maintaining for the near term?

Saloni Wagh — Director

We will start seeing the contribution from these other basket of products and market pay out from quarter two of FY ’24, because most of these products, we are still applied for the regulatory applications and we are expecting them to come very soon. So from quarter two of FY ’24, we can start seeing some good traction for these molecules. In terms of margin profile, they would be you know, a decent margin generating products, like we mentioned somewhere in the similar range of 22% all EBITDA.

Tushar Bohra — MK Ventures — Analyst

Sure. Thank you, so much. I’ll turn back in queue.

Saloni Wagh — Director

Thank you.

Operator

Thank you. The next question is from the line of Abhishek from Padmaja Investments [Phonetic]. Please go ahead. Abhishek, please go ahead with your question. Your line is unmuted.

Abhishek — Padmaja Investments — Analyst

Yes. This management change do you think it is died [Phonetic].

Operator

I’m sorry to interrupt you, sir. We are unable to hear you. Can you please speak louder?

Abhishek — Padmaja Investments — Analyst

Yes. The management turnaround like CEO leaving, CFO leaving then again CFO leaving? Yes.

Saloni Wagh — Director

Sir, like I said — before us

Abhishek — Padmaja Investments — Analyst

This kind of change is like — looks very bad on retail investor right. Yes. Because that’s the reason, right. Because in today’s call, if you see very few institutional investors turned around. Even though like you’re aspiring to be a company in grand space, CMOs space the other space — its turning out to be bad.

Saloni Wagh — Director

Its too early — like I — you know I satisfied now I have I’ve explained that the management turnarounds are talking about if we really look at it, the CEO stepping down, we have mentioned it many times in the past and we have still clarified again and again, that the CEO has just stepped down from the responsibility of CEO due to some of his personal reasons because of some of his family members not keeping well, he’s not able to give as much time to the company.

But if you look at our company structure, he still continues to be very much a part of Supriya team as a technical lead. So let us — address it once it for all that he has not left the organization, just because of some of his family members not keeping well he has stepped down from the CEO responsibility, but he has taken the responsibility of a technical lead and he still is with us for a lot of CMO opportunities and for technical advises.

In terms of CFO, which is the second thing in fact, I’ve already mentioned that with Krishna coming on board, for us as a newly listed company, this will help strengthen our finance aspect because he comes with a lot of experience running a listed company specifically in pharmaceutical sector for over 20 years. So, this should be in fact construed as a very, very positive step that we are trying to strengthen our senior management.

And in the next couple of quarters also, you will see that we are further strengthening our senior management team on our side on technical capabilities, because we definitely see a lot of scope of growth for the company. And to facilitate this kind of growth we need to have the right kind of technical people on board. So if anything, I feel that going forward and even now the complete focus of the management is to strengthen the senior management team.

Operator

Thank you. The next question is from the line of Siddharth Purohit from InvesQ Investment Advisors. Please go ahead.

Siddharth Purohit — InvesQ Investment Advisors — Analyst

Yes. So earlier, when you’re distressed probably mentioned that we worked more on a short term contract, rather than a very long term medicine with our customer. Is there a change in strategy for the new molecules and new geographies that we are looking for, because probably that is one of the reasons probably we have lost some sort of business. So what is the like new arrangement that you’re looking for, for a sustainable growth?

Saloni Wagh — Director

So as you’re aware, the API market is very, very dynamic. So most API companies and including ourselves, when it comes to API, we will continue working on short term contracts, because the raw material pricing situation is so dynamic that if we get into a long term contract, it might not be beneficial for the company, but because the API space is more short-term contract driven, we are trying to do this aspect by introducing CMO opportunities, where in the Advanced Intermediate and API requirements with some of the multinational companies would be a long-term, like a five year, seven year time. So we are trying to derisk on that aspect. So then, going forward, it would be both short-term as well as a long-term contracts.

Siddharth Purohit — InvesQ Investment Advisors — Analyst

And did your Chinese customer is still like are in touch with you? Or what is your like, feedback they will continue business with you if things improve so what is your commentary on that?

Saloni Wagh — Director

Yes, absolutely, they are in touch with us. That is why we are able to share it in detail the current market reality of China. And we have been sharing that over the last couple of calls as well. Like I mentioned that, SUPRIYA has a very strong position in China, because of the military compliance that we have and also the quality of material that we produce.

We are also an NMC approved site. And like our chairman said, that most of the end-users in China have approved SUPRIYA as a primary source. As soon as the market stabilizes, we would be — their preferred source, and the entire volume would start coming back to SUPRIYA.

So it is just a matter of when the situation stabilizes. It will take definitely a couple of more quarters. It is not short-term. This is a long-term impact on the market. And for it to recover we are anticipating at least another two, three quarters.

Siddharth Purohit — InvesQ Investment Advisors — Analyst

Okay. That’s it.

Operator

Thank you. The next question is from the line of Karan Asli from Maximal Capital. Please go ahead.

Karan Asli — Maximal Capital — Analyst

Hi. Thanks for the opportunity. So I just want to the labor on the China issue a little bit. Any thoughts on the local capacity in China have any local competitors increase their capacity or up their compliance game, if you’re aware of that?

Saloni Wagh — Director

The local manufacturers in China historically also to date EHS or there are non-GMP compliant, that is why even you know companies like Johnson & Johnson and GSK who have their sights in China it will continue to buy from SUPRIYA.

So, in that aspect, there is no change. They are still non-GMP compliant. So, we are still there preferred their goal. Also in terms of capacity, because the demand has gone down, there is no further capacity enhancement also which has happened locally in China. So, this is the current situation what we have understood from our agents in China.

Karan Asli — Maximal Capital — Analyst

Right, right and wouldn’t be possible for you to segregate your demand in China into local consumption and export formulations?

Krishna Raghunathan — Chief Financial Officer

No. I think we decided to say like this, because I have told you in my previous speech that we are supposed to get a certain quantity only. If we exceed, there won’t be possible to ship one kg also because the day we do that, anti-dumping duty will be done on us. Today you are seeing many of the items we are our self putting anti-dumping duties on them in reserve, many industrial areas certain products are getting closed.

So we have a certain market, certain GMP standards, certain rules, and that is already on the website of the Chinese and NBN GSDA only foreign source Supriya IBL-approved so that is why we are able to sell, but not with 100% sales, limited sales. That’s my submission to you on China. I think China we have already discussed a lot of things, let’s not discuss on China metrics again and again, because we should say Having said like what the Chairman is ascribing to see you will not have 100% capacity out of China, it is one way that setting up the capacities will be granted and that is what we are able to get up. Okay, now that there is a drop in demand, because of what Dr. Saloni has already said in the speech earlier. That is why there is a different China at this point in time. I think this should be settled once and for all at this stage. I think that is the entire submission of the management on China.

Karan Asli — Maximal Capital — Analyst

Sure. And my next question is pertaining to the margins, now, I think you said directionally, we expect margins to improve, but at the same time, China is not going to come back till let’s say Q2 of next year at least. And the regulated products also that we are pushing into the market will also come in Q2 of next year.

So, meanwhile, how do we — what would be the more granular levers we have to get close to that sustainable margin level that we have because that would mean that you would have to again come back significantly in terms of 40% to 60% plus contribution. So, do you see that happening?

Krishna Raghunathan — Chief Financial Officer

What — sorry, Saloni, go ahead.

Saloni Wagh — Director

So, like I said before, as well, for if you look at our revenue generation from the — it has not been impacted, there is no sales loss as such. We are doing quite well, I mean, the product portfolio and the market, they’re very, very stable. It’s just that some of the sales from quarter three has gotten pushed into quarter four due to the long holidays. Other than anti-histamine in Chinese market, we also have anesthetic range of products, which are doing quite well and which are also one of the other major therapeutic categories for the company. And they’re doing quite well in the regulated market space. So that we will see a lot of contribution from these therapies, even anti-asthmatic for that matter, we’ll see revenue generation from these therapies. So that’s the reason why we expect the normalized margin.

Karan Asli — Maximal Capital — Analyst

Sure. I see, And in terms of how we expect to end this year, I think our target was to reach out to last level’s — last year’s revenue levels. Do we think we will be able to match that?

Krishna Raghunathan — Chief Financial Officer

See at this point, — and we don’t want to give any sort of guidance. But yeah, it looks like we might fall a bit short on the revenues when it comes to last year levels. Yes, of course, that is what is going to happen.

Karan Asli — Maximal Capital — Analyst

Sure. Thanks and good luck.

Krishna Raghunathan — Chief Financial Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Dr. Satish Wagh for closing comments.

Satish Wagh — Chairman and Managing Director

Thank you. I would like to thank you everyone for taking time out and joining on the call. I hope we have been able to respond to your queries. If you have any queries — further queries, you may reach out to our Investor Relations partner, Oriental — Orient Capital. Thank you very much and have a good day.

Operator

[Operator Closing Remarks]