Divi's Laboratories Ltd
NSE:DIVISLAB
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3 367.85
6 214.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Divi's Laboratories Ltd
Earnings Call Analysis
Q1-2025 Analysis
Divi's Laboratories Ltd
Despite facing widespread geopolitical uncertainties, Divi's Laboratories has shown remarkable resilience. The company's strategic management of its supply chain and operational processes has enabled it to continue meeting customer demands efficiently. This proactive approach in a volatile market places Divi’s in a strong position for future growth opportunities.
For the first quarter of the fiscal year 2024-2025, Divi's reported a consolidated revenue of INR 2,197 crore, marking an 18% growth from INR 1,859 crore in the same quarter of the previous year. The Profit Before Tax (PBT) also showed an impressive increase to INR 604 crore from INR 492 crore, while the Profit After Tax (PAT) rose to INR 430 crore from INR 356 crore year-on-year.
Raw material costs have remained stable for Q1, representing about 40% of sales revenue, slightly up from the previous year's 39%. The company mitigates risks by maintaining extended safety stocks and diversifying its supply base. Logistics continue to pose challenges with increased shipping rates and transit times, but Divi's remains vigilant, monitoring shipments closely and advancing shipping schedules by 3 to 4 weeks to ensure timely deliveries.
Exports accounted for 86% of total revenues, with significant contributions from the U.S. and Europe making up 70% of exports. The product mix between generics and custom synthesis is split 51% to 49%, respectively. Despite a forex loss of INR 1 crore in the quarter, the company maintained a constant currency growth of 18%. The nutraceutical segment, however, remained flat at INR 178 crore, the same as the previous year.
During the quarter, Divi's capitalized assets worth INR 60 crore and reported a capital work-in-progress of INR 1,062 crore, majorly fueled by the Kakinada project, which alone accounts for INR 837 crore. To date, total investments in the Kakinada project have reached INR 1,018 crore. As of June 30, 2024, the company holds INR 4,229 crore in cash reserves.
Divi’s Laboratories announced a successful U.S. FDA inspection at its Unit-II production facility, completed with only one procedural observation, underscoring its commitment to high regulatory standards. The company is also expanding its greenfield project at Unit-III, with production activities expected to commence gradually during FY 2024-2025 in the 200 acres Phase 1 site.
Environmental sustainability remains a top priority for Divi's, promoting resource efficiency across its supply chain. The company's CSR initiatives have positively impacted over 1 lakh students across 1,100 schools and nearly 2.5 lakh individuals in 44 villages, focusing on education and community empowerment.
Divi's continues to gain market share with its emerging generic products and custom synthesis projects. The company is advancing several new projects across all clinical phases and is focusing on manufacturing peptide fragments for GLP-1 and GLP-2 compounds. Plans are in place to commercialize new generic filings by FY 2026.
Looking ahead, Divi's maintains a positive outlook with plans to achieve double-digit growth. The company will focus on balancing its custom synthesis and generics businesses. While it faces pricing pressures in the API segment, long-term customer contracts and market share growth provide stability. The company will strategically invest in capacity expansion as required, especially in light of increasing demand for Phase II and III molecules under the BIOSECURE Act.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the earnings conference call of Divi's Laboratories Limited for Q1 FY 2025. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. M. Satish Choudhury. Thank you, and over to you, sir.
Good afternoon to all of you. I'm M. Satish Choudhury, Company Secretary and Chief Investor Relations Officer of Divi's Laboratories Limited. I welcome you all to the earnings call of the company for the quarter ended June 30, 2024.
From Divi's Lab, we have with us today Dr. Kiran S. Divi, Whole-time Director and CEO; Nilima Prasad Divi, Whole-Time Director, Commercial; Mr. L. Kishore Babu, Chief Financial Officer; and Mr. Venkatesa Perumallu, General Manager, Finance and Accounts.
During the day, our Board has approved the unaudited financial results for the quarter ended June 30, 2024, and we have released the same to the stock exchanges as well as updated the same in our website.
Please note that this conference call is being recorded, and a transcript of the same will be made available on the website of the company. Also please note that the audio of the conference call is the copyright material of Divi's Laboratories Limited and should not be copied, rebroadcasted or attributed in the press or media without the specific and written consent.
Let me draw your attention to the fact that on this call, our discussions will include certain forward-looking statements, which are predictions, projections or other estimates about future events. These estimates reflect management's current expectations of the future performance of the company.
Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Divi's Labs or its publisher does not undertake any obligation to publicly update any forward-looking statement, whether as a result of future events or otherwise.
Now I hand over the conference to Dr. Kiran Divi for opening remarks. Over to you, sir.
Good afternoon, ladies and gentlemen, and welcome to our Q1 financial year '24, '25 conference call. We are pleased to have you all here, and I hope that you, along with your families and loved ones, are in good health.
I shall begin by updating you on our operational performance. As we reflect on the first quarter of FY '24, '25, I would like to report that Divi's remained resilient, ensuring another steady quarter. This is despite our persistent worldwide geopolitical events that are leading to volatile trade conditions. We have been diligently meeting our customer requirements through strategic supply chain management and operational excellence.
The industry continues to observe pharmaceutical shifts that create room for expanding market opportunities. Building on our fixed growth engines, Divi's is focused on strategically pursuing new opportunities across various portfolios, alongside the tangible results from our previous investments and expansions we are experiencing stable demand for most of our established generics, which balances the pricing pressure on our product mix.
Our emerging generic products continued to gain market share, and our future generic with filings planned for completion in the next few months will be commercialized in FY '26.
The custom synthesis segment is advancing with several new projects across all clinical phases, and we are working on several Phase II and Phase III molecules. Our existing major commercial projects with big pharma continue to yield positive results, with continued focus on opportunities in the peptide segment. In addition to manufacturing peptide building blocks, we are also pursuing the manufacturing of peptide fragments required for various GLP-1 and GLP-2 compounds.
Our greenfield expansion at Unit-III is progressing rapidly, and the upcoming production activity in the 200 acres Phase 1 is expected to gradually begin during FY '24, '25. We are pleased to announce that we had a successful U.S. FDA inspection at our Unit-II production facility. It was a general CGMP inspection, which was completed with one procedural observation. This outcome reflects our commitment to maintaining high regulatory standards and ensuring compliance across all our operations.
Complementary to this, Divi's prioritizes environmental sustainability by promoting resource efficiency throughout the supply chain. We are committed to operating our business responsibly in all aspects and helping implementing initiatives to support ecological balance and nature conservation.
Our CSR initiatives are aimed at making meaningful contributions to the communities we operate, and we are actively working to facilitate their sustainable growth. One of our core initiatives, which focuses on holistic development and empowerment of children has made a tangible impact on the lives of over 1 lakh students in more than 1,100 schools across the states of Telangana and Andhra Pradesh during the year 2023 and '24.
We also remain persistent in our effort to uplift the whole community and have successfully empowered nearly 2.5 lakh individuals across 44 villages surrounding our manufacturing units.
Now Ms. Nilima Divi will update you on the financial highlights of the first quarter of the financial year 2024, '25. Thank you.
Good afternoon, ladies and gentlemen. I send my warmest greetings to each one of you. Thank you for joining us today as we continue to discuss the outcome of the first quarter of FY '24, '25.
Divi's has been resilient in ensuring efficient supply chain operations and reliably meeting our customer requirements. Despite the ongoing volatility in the current geopolitical landscape, the environment presents growth market opportunities. We have been proactive in [ getting ] these dynamics and optimizing our performance.
On the procurement front, we have witnessed a relatively balanced Q1 scenario. Raw material prices remain stable. However, we are monitoring the situation carefully, considering the current global event that may quickly alter. To mitigate risks, we are maintaining safety stocks for extended periods and diversifying our supply base for most of our key raw materials.
Logistics and supply chain challenges continue to persist, resulting in significant rate hikes and long transit times due to rerouting and vessel cancellations. In response, we have been vigilant and are closely monitoring each shipment, diligently implementing our risk mitigation measures. Divi's have been efficiently streamlining inventory management and advancing shipping schedule by 3 to 4 weeks.
Despite all these global challenges, our teams have been proactive in managing any potential risk and ensuring operational continuity. We remain committed to delivering the highest quality APIs and sustaining our partnership.
I will now provide you with an overview of the financial performance for the first quarter of the fiscal year '24, '25. We have achieved a consolidated revenue of INR 2,197 crores for the current quarter as against the income of INR 1,859 crores for the corresponding quarter of previous year, a growth of 18% year-on-year.
Material consumption for this quarter is at about 40% of the sales revenue as compared to about 39% in the immediate previous quarter and 39% for the corresponding quarter of previous year due to change in product mix.
PBT for the quarter is INR 604 crores as against INR 492 crores for the corresponding quarter of previous year, and PAT for the current quarter is INR 430 crores as against INR 356 crores for the corresponding quarter of previous year.
Export for the quarter is about 86%. Exports to U.S. and Europe is about 70%. Product mix for generics to custom synthesis is 51% and 49%, respectively.
We have a ForEx loss of INR 1 crore for the quarter as against a gain of INR 3 crores in the corresponding quarter of previous year. Our constant currency growth for the quarter has been at 18%. Our nutraceutical business amounted to INR 178 crores for this quarter.
We have capitalized assets of INR 60 crores during the quarter. We have a capital work in progress of INR 1,062 crores as at the end of the quarter, of which Kakinada project account for INR 837 crores. Total amount spent on Kakinada project until the end of this current quarter, including advances, is INR 1,018 crores.
As of June 30, 2024, we have cash on books of INR 4,229 crores, receivables of INR 1,942 crores, inventories of INR 3,108 crores.
You would notice from our annual report for FY '23, '24 that the dividend payout for FY '23, '24 of INR 796 crores is scheduled in the second fortnight of August 2024. Thank you.
Thank you, Madame. With this, we would request the moderator to open the line for Q&A.
[Operator Instructions] The first question is from the line of Amey from JM Financials.
And congrats on good set of numbers. I have first question on the API pricing environment. We have been witnessing prior deflation in many of these products in the API side. So how has been trending for us over 4Q to 1Q, if you can guide on the same?
The second question I have on the emerging product side. We mentioned that we are gaining market share in emerging API-generic product. So if it will be possible for the management to gain some of these products? And how has been our market share improvement in these products over last few years?
Can you please repeat your first question again? It wasn't very clear.
I wanted to know the -- how has been the API pricing environment. We have been seeing a price deflation in the API side for last 1 year. So how has been the trend in the recent quarters for us? And if any outlook you can give on the API pricing side.
Yes. So coming to your first part, we are experiencing pricing pressure across our large volume products like naproxen, gabapentin, dextromethorphan. But we being one of the largest producer and player and having long-term contracts with our customers, we are able to maintain sustainable market share and, in fact, growing in that -- in those products.
If you look at our products like dextro and naproxen or even naproxen sodium, even a 2% to 3% or a 5% growth in the product itself is a substantial growth.
With that being said, the pricing and the volume is actually complementing each well. That's what I told in the speech where we could balance and not lose the overall numbers. But yes, we do have pricing pressure, and we feel it should settle down for -- in the near future.
Starting from quarter 4 to quarter 1, we did experience pricing pressure. Or do you think it should be more stabilized?
No. We have seen pricing pressure throughout the last 2 years ever since COVID took place. And also with the geopolitical situations across, there are several factors like availability of raw materials to everything. But now we see that, slowly, we believe in the future that prices will stabilize and normalize again.
Coming to your second question, we have several products in the pipeline, like ticagrelor, a few others, just to name, which are coming off patent, which we have filed our DMS. Our customers are filing their regulatory approvals and their submissions. So as when patents expire from '26, we will start seeing revenues from those products.
We'll take the next question from the line of Surya Patra from PhillipCapital.
First question is on the custom synthesis business. This quarter, we have been continuing to see a kind of a strong performance in terms of growth Y-o-Y in the custom synthesis, over 40%. And one of the key contributor to this, obviously, the valsartan/sacubitril in the recent period.
Given the patent expiry, what we have witnessed there and the generic entry, so whether it will have a temporary impact to the momentum what we are currently seeing, sir.
I would request that you don't speak about products because we are bound by confidentiality. What I would say is we have several molecules in CS, which are in Phase II and Phase III.
Apart from this, we also produce several molecules for the brand companies in large volumes. And based on this, our sales have been very positive, and we see a lot of growth in -- either in volumes or new opportunities coming our way.
Okay. Then sir, in the contrast media side, what is the progress that we would have achieved so far? And from the target, whatever that we are trying to achieve over a period of time, to what extent that we have a progress on the contrast media side in terms of the volume progress and then growth? Sir, if you can give some sense, that will be for expediting.
On the contrast media side, we work on two specific segments, okay. One is the iodine-based compounds, which we -- which works towards CT scans. The second one is gadolinium compounds, which they use in MRI.
On the contract media, we have -- we sell both to several of the brand companies and the innovators and also to the generic houses.
In some of the iodine-based products, we have been successful, and we have been shipping commercial quantities to few of the brand companies.
Apart from this, we are also supplying in the regulatory markets, and we are seeing comfortable growth in those volumes.
Coming to gadolinium compounds, we are working on several Phase III molecules. And as and when the innovators are ready to take it to pilot based on regulatory approvals, we will take that forward.
Okay. Just one last question from my side, sir. It's been some time that we are hearing about the trade challenges. That was because of the issues impacting the trade route and, hence, the cost. And simultaneously off of it, we are also hearing availability of container.
And to some extent, from the [ challenges ] and what we are witnessing in the month of June, I think the industry has faced tremendous pressure in terms of the trade challenges impacting their export activities.
So whether we have faced anything of that sort and if that is the case, whether the continuing quarter -- the subsequent quarter is likely to be impacted to some extent, how should one think about this trade challenge that you have been facing currently?
I don't think we are immune to something that the industry is currently facing. We did face some challenges, and we are continuing to face those challenges. But we are also making sure that we are planning well in advance.
We are taking -- we are keeping that in mind. We are taking all these situations into consideration, while planning our shipments. So, so far, we have been slightly more careful and consistent in our shipments. We are making sure that the customer is not affected at the end of the day.
[Operator Instructions] The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Sir, first of all, I missed your comment on the peptide block. You referred to something additional with respect to the investment. If you could clarify and elaborate on that first.
Sure. So in the peptide business, initially, we were just manufacturing protected amino acids. They're called building blocks for amino acids, and we have been manufacturing that. We had the experience for 14 years ago, and then we started again. And we were manufacturing for the customers who are making the GLP-1 and 2.
But now we have started working on tetramer and decamer, basically 4-chain amino acids, 10-chain amino acids, either through solid phase or liquid phase. And our pilot plant is almost ready, where we will be producing decent quantities. And also we will be taking this forward commercially. We have already ordered a few 500-liter reactors to take this forward.
The interesting thing here is even the customers who are producing GLP-1 and GLP-2 finished products are quite interested to work with us on this molecule. .
Understood, sir. So this will subsequently go through, let's say, the execute batches to scale-up batches and then the compliance and so effectively...
Yes. Just on the building blocks, we have been -- we are actively supplying to the companies who -- to the innovators and to the companies the peptide building blocks. Now we are taking one step forward and building the fragments. So from the fragments, they combine 2 or 3 fragments, and the API comes out.
Understood, sir. Sir, in contrast media, whatever development that has been happening at the innovator level in terms of those products, the intent is to reduce the concentration of, let's say, iodine or gadolinium, as they are sort of increases in purity or -- as far as human beings are concerned.
So from that point of view, does this still stand a good volume opportunity or it is going to be a relatively small volume opportunity for us?
Are you talking about iodine-based compound or gadolinium compound?
Gadolinium compounds.
Gadolinium compounds, everyone requires an MRI. The volumes are huge, okay? But now, like in the olden days, you would take an MRI. You will get -- anyone would take a gadolinium compound and have a full body scan.
Now the compounds are specific to the heart, to the brain, to the lungs, okay? And the compound, they directly goes and sits there. So the innovators are now specializing on these type of compounds. So we are a part with them in the journey. And of course, they will have opportunities.
Understood. Sir, you mean to say volume would be there, but the concentration, let's say, that will continue to reduce in terms of dosage?
No, the dosage will be the same. It doesn't matter. It's just the -- that the binding agent that takes the product directly to the area that is required.
Got you, sir. And lastly, if I may just squeeze in one more on the API. So the industry feedback has been that the inventory in the channel post-COVID and given the shelf life of products being 4 to 5 years, does it mean that we still face another 12 to 15 months where prices continue to slide? And so we continue to deliver more volume to at least grow the revenue. Is that also the case for Divi's?
On the generic side of the business, like I explained in my presentation, we have long-term contracts with several customers. That being said, our customers have not lost any market shares, but only there is a price erosion because there are several people trying to destock.
As such times, we support our customers, that's why we have a short setback. Once the price has stabilized, we still cannot give a date on it, but I'm sure it has to stabilize at some point. This happened about 10 years ago. We had this kind of cycle, so we are confident it has to stabilize at some point. Things will be back to normal.
Understood. And just one more. Just if you could share the breakup of the API business into the legacy molecules and the new molecules.
Can you elaborate on your question, please?
Sure. Let's say we have the naproxen, gabapentin, [indiscernible] molecules as a part of API generics business and new molecules typically which you would have launched over the last 2 years. So if you could help us breakdown the sales of API generics into these 2 buckets.
We normally wouldn't want to break that up because we normally break up and see what we are supplying to U.S. and Europe or what we are doing in the generics and the custom synthesis business. But breaking up -- breaking it up molecule by molecule is not something we would normally like to do because we need to look at the entire basket.
We wouldn't want to be a product-heavy company wherein we are depending more on one product or -- and that would drive the company's growth. So we would want to keep the mix between the products as equal or as balanced as possible.
The next question is from the line of Sanjay Kular from ACME Private Limited.
Compliments to you for delivering good set of numbers. I have a couple of questions. One is what kind of sales we can generate from expansion at optimum capacity utilization since Kakinada is beginning this year?
Second question is what is the update on your tie-up with the -- that [indiscernible] 100 crore a unit, which you'll be going to put in our business will start probably from '27? Are we experiencing new businesses from CDMO opportunities because we are hearing that there are lots of CDMO inquiries are flowing to India. What is your view, sir?
So the expansion in Kakinada, like I explained in the -- in my presentation, it will start phase-wise, and then it has to go through regulatory approvals, okay? Regulatory approvals take 1 to 2 years. Once the approvals and everything we get, okay, we also have to file DMS from there, do our validations. Our customers have to file their ANDAs or NDAs. And then the whole process will take 1 to 2 years.
But right now, we will start doing our validations, and we'll also start certain pre-chemistry products. So I would say you have to look at any product coming into market. We will declare about at least 1, 2 years with all the regulatory approvals that are taking place.
Coming to your second question on the INR 700 crore investment. This is an increase in capacity for one of our projects, okay, for -- based on the CS side, which is -- which the investment is going through where the growth will happen. .
Okay. And how are the inquiries from the U.S. regarding [indiscernible]? We are experiencing -- India is experiencing a lot of inquiries from U.S. and European clients. What is your view, sir?
We are -- like I explained in our -- in my presentation, we are getting a lot of Phase II, Phase III molecules, a lot of fast-track molecules where it is in advanced stages and it's waiting for regulatory approvals from the CS companies and from our multinationals. So we are seeing a lot of opportunities coming our way.
We'll take the next question from the line of Sanjay Papti, an individual investor.
As the current participant is not answering, we'll move on to the next question, which is from the line of [ Tiresh ] from Vito Capital.
Sir, a couple of questions. If you can share the volume growth in the API business. Hello? Am I audible?
Yes, we're just looking at it. One second, please.
It's -- as we said, it is in line with our double-digit growth, which we always say that we are very optimistic about our double-digit growth, both volume based and price based, which is reflected in our revenue. So I would say it is the same.
Okay. Just to understand it properly, the value growth in constant currency is flat, but you've seen volume growth in double digit in the quarter in the API business. Okay.
And the second question is on GLP-1. You said you're making building blocks. Now you want to make fragments, and then you should go into final API. So do we have the capability and the aspiration to go into further downstream into making the final API?
See, right now, the final -- everything depends on the innovators, right, what they prefer to outsource, what they prefer to give it out. Right now, they're interested in looking at opportunities, working with us on fragments. So we are working on the fragment.
Before this, if you asked me 6 months ago, they were looking at working with me only on peptide building blocks. So it is on what they want and when they need it. It is -- when the opportunity comes, of course, definitely, we would be interested in it. Right now, we have been asked to look into fragments, and we are investing into fragments.
Understood. So last question. In contrast media, how -- can you just give a rough split of how much of the revenue you booked under API and how much you booked on the custom synthesis?
I can't comment on that because we work with the brand companies. I can't comment on that, sorry.
Is it like -- without getting exact, is it steady, which we -- is it more skewed towards one or this is fairly split between the 2 segments?
See, that's a very simple question. If you look at the world market itself, the major chunk is controlled by the brand companies, not by the generic houses.
The generic houses only hold about 10% to 15% market share. The brand companies are the ones who own about 85% to 90% market share even today because they manufacture the equipment and everything. They have strong control on the product.
The second question was that if you have your own BMS and you're supplying to the brand, you will still classify it under customer synthesis, right, not under API.
For the brand, I would produce it by his process and his rules of synthesis. Not by mine.
We'll take the next question from the line of Surya Patra from PhillipCapital.
And sir, I just wanted to have the income and the assets, what could be the implication of this BIOSECURE Act, which is expected to be implemented in the later part of the year to our generic business as well as the custom synthesis, whether generic is also likely to be benefited, that is my first clarity that I want to have.
Secondly, downturn [indiscernible].
Surya Patra, your voice is not too audible for us. Maybe a bit louder?
Sir, please use your handset to ask questions.
Yes. Is it audible, Ma'am?
Yes. Please go ahead. Yes, yes.
I wanted to have a sense about the implication of this BIOSECURE Act. It is expected to be implemented in the later part of the year by U.S. So impact on the generic business and impact on the custom synthesis.
While it is believed that the custom synthesis generally will see the benefit, whether that is restricted to only custom synthesis or even generic can have a benefit. And just an extension to the custom synthesis point, even if this will be implemented, there would be a gestation period till 2032.
So during that period, whether we will get a benefit for custom synthesis or not. So in your understanding about this BIOSECURE Act and the likely implication, if you can share.
See, the BIOSECURE Act is something what the U.S. has decided, and we are definitely seeing a lot of opportunities, a lot of them in Phase II, a lot of them in Phase III. Some are already commercialized on the CS side, which they would like us to be the second source, where they are looking at opportunity and the feasibility over there.
So there are several opportunities that are coming on our way. And with several of the brand companies, we are the preferred supplier. And in some of them, we are one of their sites on where we get to bid with their own sites on the products. So with all that being said, we do have good opportunities on the CS side.
Now with BIOSECURE Act, we are seeing more number of Phase II and Phase III molecules than what we saw before. Coming to whether it is [ applicable ] even to the generics side, yes, we are seeing interest coming on the generics side, too. But there is a long haul where generics are something that are price sensitive.
We have to see how this will pan out. But right now, we are seeing a lot of interest only from the custom synthesis side of the business more than the generic side.
Okay. And it will be visible from now on or itself, you mean to say?
Yes, we are seeing visibility from now. Just 2032 is only 8 years away. For qualifications, for everything to go through is about 3 to 4 years itself for brand companies to get us into their filing and then go forward. So it is a long haul.
Okay, okay. Sure, sure. Just an extension to that, sir. In the generic business, we are expecting the new pipeline or the new product opportunities are likely to be the key growth driver over the next 2 to 3 years for us. So since you are already prepared for those opportunities, so sir, I just wanted to have a sense that, okay, what would be the level of your integration there at the API level.
So obviously, it would be lesser compared to the existing ones because, there, you could be end-to-end integrated. But here, what could be the level of integration?
Divi's has a concept for generic molecule. Whenever we enter into a generic product, we look from manufacturing, everything, from our basic raw materials, all the way to the finished API. The reason being we would like to control all our impurity profile. Thereby, we don't have any regulatory issues in the future.
So it's not that we buy a key starting material from someone. We will buy one of the intermediates from someone and then start making it. We prefer to make everything.
One, we control our costs. We have better costs. We have better impurity profile management. And we have supply chain continuity in the product. So on -- even on all the future generics, we are filing right now, which are going to come off patent, some in '25, some in '26, some in '27. All of them, we are completely backward integrated.
We'll take the next question from the line of Neha Manpuria from Bank of America.
Sir, since you mentioned that we have a lot of Phase II, Phase III molecules post the BIOSECURE Draft Act being out there, how are we thinking about Phase 2 in Kakinada given it takes 1 or 2 years to get approval?
Do you think it -- there is a need for us to possibly think about fast-tracking the next phase? Or do you think this phase would be enough for us to capture any growth that comes our way over the next 3, 4 years?
See, the daily increased capacity is when we come to about 90% utilization. Then we start to think about starting Phase II and then fast tracking it. But right now, based on the customer requirement, based on Phase II -- see, Phase II and Phase III, we can run it in our pilot plants. We have sufficient pilot plants because the volumes are small. They are not like tons of volume.
But once it goes into commercialization, we will know that in 1 year in advance. And as we know, we will take it forward, and then we will start either using it from our existing capacities or we will build new capacity as and when required.
Recently, we have asked for investment because we saw huge opportunities with few of the CS projects. And this will be commercialized in the coming years. So in the same fashion, we will have good visibility and we will invest based on -- we won't keep the plants idle.
Understood. So currently, where we are, Kakinada should be enough to service the projects that we should get in the next 2, 3 years.
But now between the 3 units, the capacity should be sufficient and should maintenance at between 80% to 85%. So if any of the products again spiked up, we don't know, maybe it may happen in 6 months or 1 year, we will look at Phase 2 of Kakinada immediately.
Got it. And sir, given that you talked about 2 or 3 new DMF opportunities since they are going off recent in 2025. If you look at the DMF filings, we don't see as many filings for generic products from Divi's.
So are these products that are going to be more back-end weighted rather than, say, in the next 12 months? Is that the case that a lot of these are coming probably post calendar year '25?
I'm sorry. I didn't understand your question.
So one of the growth drivers that you talk about for the generics business are the drugs that are going to off-patent between -- in the next 2, 3 years, '25 to '27. And you said 1 or 2 products, 1 or 2 of these DMFs should come for Divi's.
But if we were to look at the DMF filing, the U.S. FDA, we don't see as many DMF filings on Divi's to show that the launch pipeline on the generic API side. So are these opportunities more back-end weighted, probably in calendar year '26, '27? Hence, we are not seeing as many filings.
Like I explained, some products are coming off patent in '25, some are coming off in '26, some are coming off in '27. Some finished -- we finished the regulatory filings.
Now the customer has to trigger for the DMF to become active. So they have to do their ANDA, their validation, submit stability studies and then file with FDA, have the deficiencies answered for them to be active. So filing is a process well in advance. That's all I can say.
[Operator Instructions] We take the next question from the line of Gaurav from Equirus Securities.
We'll move on to the next question, which is from the line of Girish Bakhru from OrbiMed.
Sorry. Just wanted a bit more clarity on the -- I think you commented initially on the pilot plant. Is it possible to give total reactive capacity you're aiming for?
See, right now, we have set up our pilot plant, which has 50-liter reactors, where we are -- we will be doing KG level. And once the pilots have been successful, in the meantime, we have ordered commercial-scale 500-liter reactors, where we will produce larger volumes of the fragments.
And these, you mainly said you are mainly doing solid state, not liquid.
We are making both solid phase and liquid phase. We have capability both for solid and liquid phase.
Understood. But 500-liter is -- I'm just trying to understand. Is that sufficient to meet the demand?
GLP-1s are not large volume products. So if you look at the -- in terms of tonnage, they are not large volume products. So we will -- we have -- we will add multiple 500-liter reactors, which we have already a few reactors now, which will -- where the synthesizer will take place. But what we -- it's not that you need huge volumes like API, like 10,000 liters, 20,000-liter reactors.
Understood. And just on a similar line, these fragments, will they attract FDA or any other inspection?
I'm sorry, I didn't understand.
Once you're doing fragments to the peptides, would that come under CGMP and would attract any...
It will come under CGMP, and it will call for an inspection at an appropriate time.
The next question is from the line of Alok Dalal from Jefferies India Private Limited.
One question on nutraceuticals. Is the revenue for the quarter INR 178 crores? Did I hear that correctly?
Can you repeat that question again, please?
Yes. Madam, the revenue for nutraceutical segment was INR 178 crores. Is that correct?
Yes.
Okay. So same time last year was also INR 178 crores. What's the revenue, INR 178 crores in 1Q, '24, is it?
Yes.
So there's been no growth in the segment. What could be a reason for that?
See, I would say that the same quarter of the last year, it was around the similar number. But I would look at it like -- just like how we look at our API business, the nutraceutical business. I wouldn't look at it on a quarter-on-quarter basis. I would look at it in the whole year.
And I would say, if I'm looking at the full year of how the business is going to phase out, we are also very confident in that particular segment to have a double-digit growth. But yes, sometimes, the shipments would happen more in a certain quarter. And certain quarters, it would be a stable business.
You would have also noticed that our Q4 is heavy compared to Q1 of last year. So it's a kind of comparison -- it's a comparison and should not be taken into consideration quarter-on-quarter. It's something that you should look year-on-year.
Okay. And second question is on the product mix theme. So from your commentary, it appears that your custom synthesis business will have a much larger share of revenue over the next 2, 3 years. Does that mean that the company goes back to the historical margins of 35% plus, which it used to do when custom synthesis was the largest contributor?
Our custom synthesis and generic business usually are, some quarters, it would be 45-55. And some quarters, it would be 50-50. But we would -- as a company, we would like to have it at 50-50, wherein we are equal in both generics and custom synthesis. And we are not product heavy or a customer-heavy company.
So I would not look at the organization going heavy on custom synthesis. Rather, I would want it to be on par with the generic business. But yes, the wishful thinking that what the historic number we had one particular year back in the day, I wouldn't say it's something that we don't desire. We are working towards it. But every product can't be that.
The next question is from the line of Amey from JM Financials.
If I've missed out during the call, is it possible for the management to give CapEx guidance for the next 2 years?
I think we'll have a new CapEx guidance more towards next quarter or the quarter after. Because right now, we are in -- we are trying to complete Kakinada project. Also we have a few CS projects where we have -- we are investing money in. So we would like to first complete the existing projects before we look at new CapEx.
And like I explained, as opportunities come, we take CapEx. We don't build plants and keep them idle. We are around 82% occupancy on the plant. Once we reach 90% or we feel are reaching there soon, we will start investing again.
Sure. And what maintenance CapEx should one assume for the year would be around INR 250 crores, INR 300 crores? Or...
I would say that would be the number, around INR 250 crores, INR 300 crores.
Sure. And the last question, is it possible to give what has been our CapEx on the GLP-1 block so far? And any future plan which we have on the fragment side? How much do we plan to spend?
Generally, we wouldn't want to break that up regarding product by product. We do mention unit by unit, but not product by product.
Sure. If I ask you one more, we have been around INR 2,000 crores kind of a quarterly revenue run rate. So if we have to break from this number, and what would be that one project which would drive that change in? Will it be GLP-1 product or it would be led by some of the custom synthesis opportunity?
See, the investment is across our 6 engines, okay? We have the sartans, which are growing at almost -- one of the sartans growing at 60% growth, okay? We have our increase in capacity for our existing generic products, even from products like levetiracetam, valsartan, pregabalin, carbidopa/levodopa, they're growing tremendously, okay?
Our CS business is growing. We have several projects. And some of them, their customers are asking us to increase capacity. So even that side, there is a considerable amount of growth. We are having growth in our contrast media business where I think one of the contrast media, we almost have to double our capacity now. We're in discussions on that.
So I cannot point out one product or one growth engine saying we will grow in GLP-1. It is something where we have been doing peptide building blocks. Those were nonregulatory-based materials. You make individual amino acids, protected amino acids and you sell them to the innovator or to the -- fragmented and then he would sell it.
Now because there is huge demand in GLP-1 and we have the expertise in making fragments, innovators are showing interest in working with us, and they have been giving us fragments. Immediately, we have set up an R&D where we could manage both solid phase and liquid phase since we have experience in it.
And we have manufactured samples. We have now just almost finished constructing our pilot plant, and we will start making kilo batches. And commercial volumes, we have ordered a few reactors. And as and when the customers approve, because we have to go into the filing, that's a huge process. When the time is right, we will invest into that and then take it forward.
We'll take the next question from the line of [ Geisha ] from Gajan Capital.
Am I audible now? First of all, congratulations on great set of numbers. So can you please confirm the existing product mix between API -- the API and custom synthesis segment? And how do you foresee the profitability in these segments for the upcoming year? If you could give some guidance on that, sir.
So our generics to custom synthesis is 51%, 49% this particular quarter. And going forward, I would say we are confident that we would be having a double-digit growth.
And my second question would be, any upcoming CapEx? Would it be towards the custom synthesis segment or towards the API segment?
Well, I think the existing and the future CapEx that we are planning currently is spread across the generics and custom synthesis. I would say we are focusing on all the 6 growth engines simultaneously. And the expansion plans are spread across all of them.
The next question is from the line of Kunal Dhamesha from Macquarie.
I think I missed the number of 500-liter synthesizer that you have ordered. So can you please share for the GLP-1 product?
If I'm not wrong, we have about for the commercial scale about 2 or 3 of them. But I have -- I think it is 2, but -- or 3. I will just check again. But to my knowledge, about 2.
Sure, sir. And which plant this would be housed in? .
This will be in Unit-I. So like I explained, once we finish our pilot work, which we have already have equipment 50-liter reactors in, we will start doing commercial scale with the equipment we have.
We don't need a large number of equipment for peptide. Once we run the pilot batches, then we will go ahead and buy further reactors based on the volume the innovator will be giving us.
Sure. And sir, we will have the basic infra ready, let's say, if we want to order or install more capacity on this. So do we have enough vacant production suite available in Unit-I to rapidly scale up?
You are talking about GLP-1, right, the fragments.
Yes, GLP-1, yes.
These are skid mount units. So there is enough space for -- to put them in the plant.
Okay. So it doesn't require footprint, like the fill finish line, right? I mean these are more...
Can you please repeat it again?
So these are not like fill finish line, which require proper treatment, et cetera. This can be moved around in the production area. Is that what you are suggesting?
No. What I'm saying is the unit comes as a skid mount unit. It's not that you have to build a whole block and then you have to put it at a certain place. These can be easily accommodated in a row.
And also you need to understand, as we mentioned in the previous con calls, most of our facility is a multipurpose facility. We can change. So we can use a certain area in a certain way. And also we do -- we can use it in a multipurpose. So the movement shouldn't be a problem.
Sure, sure. And sir, is it a fair way to understand that some of these innovator companies, bank based, would be here at our presence now helping us with the technology transfer?
I'm sorry. I cannot comment about it.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Just one more question from my side in terms of the asset turn. If you could elaborate even the product mix, generics, custom synthesis, and then peptide also getting further higher contribution. So what kind of asset turn can be expected?
If we are looking at a very longer-term horizon, then it is 1:1 is what we are expecting.
Currently, it is just 0.7, 0.6, if I'm not wrong.
Yes.
So with this Kakinada CapEx specifically and with the API new products, which would come in '26, '27, so can that build up to one? Is that the safe assumption?
I would say in a long term, yes, that's a safe assumption to have in the next 2 to 3 years.
The next question is from the line of Kartik, an individual investor.
Can you please provide the physical progress of the Kakinada plant? And are we on schedule for the commissioning and commercialization? That was my first question.
We are -- the Kakinada plant would be ready for commercialization towards the end of '24, '25. And -- but it would take time to make it for the product to be approved going through all the regulatory requirements. So if you want to really see the benefits from Kakinada plant, it would take another 2 years.
Yes. And one more question. Out of the addressable market, as we were discussing, many products are going for losing of exclusivity by '25, '26. What is the total addressable market, which Divi's is seeing in the products, which are going out exclusivity?
And are we ready to capture the market with the capacity, which is available with us? In short notice, will we be able to cater those? This is my second question.
If I have to answer this question, if you look at Divi's historically, whether we produce naproxen, dextromethorphan, we were not the first player to come in. We might have been the 25th player. In valsartan, we were the last player.
But today, we hold large volume shares because we start from basic chemistry. We make our own raw materials. We make our own intermediates, and we produce our own products. So we only get into molecules that we are confident we will have a market share in it.
Yes, sir. Sorry. And what is the -- related to the API taking effect, how is the competitive intensity now? And do we expect it to go down in the upcoming year?
See, like I explained, right, as of now, because of our long-term contracts with several of our customers, we're able to sustain market share and actually increase in a few cases, while our pricing pressure is still there.
That's how the pricing pressure. And with the increase in market share, we were able to maintain and balance generic performance.
Now that being said, when will the pricing stabilize? I wish to stabilize it today, but I don't have control on that. It should happen soon. We're hoping in the next coming few quarters, things should slowly stabilize.
Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to Mr. M. Satish Choudhury for closing comments. Over to you, sir.
Thank you all for joining us today for the earnings call of Divi's Laboratories Limited. In case you need any further clarification, please reach out to our Investor Relations. Thank you.
Thank you, members of the management. On behalf of Divi's Laboratories Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines.