Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SMS Pharmaceuticals Ltd (BOM:532815, Financial) reported an 18% year-on-year increase in revenues for Q2 FY25, reaching INR196.75 crores, driven by healthy volume growth across its portfolio.
- The company achieved a 20% year-on-year growth in revenue from operations for the first half of FY25, reaching INR361.2 crores, supported by a strategic focus on expanding volumes in key APIs.
- SMS Pharmaceuticals Ltd maintained steady EBITDA margins at 16% for Q2 and 18% for the first half of FY25, thanks to ongoing operational efficiency efforts.
- The company received the EDQM certificate for its Vizag facility to supply ibuprofen for Europe, reflecting its commitment to quality and compliance with global standards.
- SMS Pharmaceuticals Ltd is on track with its backward integration and capacity expansion projects, aiming for commercialization by Q4 FY25, which is expected to support long-term growth.
Negative Points
- Gross margins for Q2 FY25 declined to 30% due to rising raw material costs influenced by geopolitical tensions.
- The company faces ongoing pressure from broader industry challenges, impacting its financial performance.
- There is significant price pressure on one of its key products, leading to a pricing erosion of around 10% per year.
- The market for one of its JV products has consolidated, with flat or slightly declining volumes and increased competition.
- New product commercialization is delayed due to patent issues, with some products expected to take two to three years to launch.
Q & A Highlights
Q: What are the growth drivers for SMS Pharmaceuticals in terms of increasing profit, and how will the INR150 crore CapEx plan contribute to revenue growth?
A: The CapEx expansion, expected to be completed by Q4, focuses on backward integration of key materials for critical products, enhancing margins by reducing price pressures. This vertical integration will help maintain margins despite pricing challenges. - Vamsi Potluri, Executive Director
Q: Can you provide details on the global market share and volume of the product Renology?
A: SMS Pharmaceuticals holds a 40% global market share for Renology, with significant presence in the US and Europe. The product has a global volume of around 60 million tons, with SMS capturing 30% to 35% of this volume. However, the market has consolidated with flat or slightly declining volumes and a 10% annual price erosion. - Vamsi Potluri, Executive Director
Q: What is the status of the new product line expansion, and when will these products be commercialized?
A: The major CapEx is for existing products, with 25% allocated for new products, which are currently in the pipeline or validation phase. These new products, due to patent constraints, are expected to be commercialized in two to three years. - Vamsi Potluri, Executive Director
Q: What will be the capacities post-CapEx in Hyderabad and Vizag, and what are the current utilization levels?
A: Post-CapEx, Vizag's volume capacity will reach around 3000 km, while Hyderabad remains unchanged. Current utilization is at 60%, expected to increase to 75% by FY26. - Vamsi Potluri, Executive Director
Q: How will the backward integration of raw materials impact product costs and margins?
A: The backward integration, expected to be completed by Q4, will reduce dependency on external suppliers, especially amid geopolitical uncertainties, and is anticipated to improve profitability by 5% to 8%. - Vamsi Potluri, Executive Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
