Solara Active Pharma Sciences Ltd
NSE:SOLARA
| 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 |
320.1
822.35
|
| 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.
Solara Active Pharma Sciences Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Solara Active Pharma Sciences Limited Q3 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhishek Singhal. Thank you, and over to you, Mr. Abhishek Singhal.
A very good afternoon to all of you, and thank you for joining us today for Solara Active Pharma Sciences earnings conference call for the third quarter and 9 months ended financial year 2023. Today, we have with us, Jitesh, Solara's MD; and Hari, ED and CFO, to share the highlights of the business and financials for the quarter. I hope you have gone through our results release and the quarterly investor presentation, which have been uploaded on our website as well as stock exchange website. The transcript of this call will be available in a week's time on the company's website.
Please note that today's discussion will be forward-looking in nature and must be viewed in relation to risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to Investor Relations team.
I now hand over the call to management to make the opening comments. Jitesh?
Thank you, Abhishek. Good afternoon, everyone. Thank you for joining the call today. Before I get into the financial results, we take this opportunity on behalf of the promoters, the Board, the management. We'd like to thank all our investors, our bankers, our partners, customers, suppliers for reposing faith in Solara as we have returned to positive growth territory. So thank you all once again.
Coming to the Q3 performance. The Q3 FY '23 has been a turnaround quarter for Solara as we have achieved most of the targeted goals when we embarked on the cost correction journey last year. We had crossed our historical quarterly revenue run rate of INR 400 crores, and our revenue stood at INR 401.9 crores, growth by 17% sequentially. Gross margins improved by 308 basis points, and it stood at 47.3%. EBITDA grew 70% sequentially, standing at INR 51 crores.
We'd like to reiterate that our cost correction strategy has started to yield positive results, which is visible from our Q3 performance. We continue to focus and build on the actions that we have initiated in this financial year to get back to growth, both in terms of revenue and margins, improving our cash flows and strengthening our balance sheet.
Firstly, our base business has shown strong growth momentum in Q3 FY '23 when compared with the previous 2 quarters. Regulated market revenues stood at 72% during the Q3 FY '23. Regulated markets contribution has seen some improvements due to sales from our focus market that is Brazil. Our base business has achieved EBITDA margins of 17.7%.
Coming to our R&D. We have filed 2 new U.S. DMFs and are on track to file another 4 new DMFs in Q4 FY '23. That brings us to a total of 6 new DMFs for this financial year. Apart from the new products, we continue to expand our geographical presence in existing products. Five market extensions were done for 5 existing products during the quarter 3 FY '23, bringing to a total of 9 market extensions for 15 existing products for 9 months FY '23.
The investments we have made in new products since the inception of Solara are yielding us the results. We continue to invest in our R&D for strengthening our generic API portfolio and CRAMS to meet the growing demands for our existing products filed as part of increasing market share through market extensions and addressing regulatory requirements for new products.
Coming to Vizag. We have started manufacturing of intermediates and final APIs during Q3, and sales were made to semi-regulated markets, which had led to a reduction in the under-recovery. We reiterate that we are confident about our Vizag strategy, and it is playing to the plan. We are making good progress for regulatory accreditation for our Vizag facility, first one being the CEP approval for ibuprofen while we wait for U.S. FDA inspections, which has been triggered by one of our major customers. Out of the 2 new DMFs which we have filed in Q3, one of them has been filed from Vizag.
So to give an update on our Cuddalore site, while we wait for reaudit and reclassification of our Cuddalore site, we have taken action to qualify 2 critical products, which is being manufactured at Cuddalore, and that qualification has taken place, one in Pondi and second in Vizag. We will be including Vizag and Pondi as additional sites in the 2 product DMFs.
Our focus markets, Latin America and China, have seen traction. Our total number of filings in Brazil now stands at 4. Our order book continues to improve each quarter, and cost improvement plans have started to deliver outcomes, resulting in better profitability in the coming quarters.
On the CRAMS front, we have had good inroads in the U.S. market while onboarding of our CRAMS head for North America. We will see traction of these efforts in the next financial year. Meanwhile, the RFPs we have submitted in the first half of this year, we are confident that we will win some of those RFPs.
I now hand over to Hari to take us through the financials for Q3 FY '23. Thank you.
Thank you, Jitesh. We are pleased to announce our quarter 3 results. The key highlights for the quarter are as follows. Our revenue for quarter 3 is at INR 401.9 crores. Our gross margin stands at 47.3%, improved by 300 basis points over quarter 2 FY '23. Operating EBITDA at INR 70 crores with a 17.4% margin and reported EBITDA at INR 51 crores at 12.7% margin.
As Jitesh rightly pointed out, our cost correction strategy have started to yield positive results, which were visible from our quarter 3 performance. Our immediate priority is to offset the under-recoveries at Vizag and achieve breakeven and profitable growth in the near term. During this quarter, we initiated sales from a Vizag facility to semi-regulatory markets, which had led to the reduction in the under-recovery at Vizag during quarter 3.
Our net current assets have reduced by INR 42 crores in 9 months primarily due to the reduction in the inventory and GST follow-up refunds. We are working to achieve comfortable net debt-to-EBITDA ratio. Our primary focus is improving of the cash flows by prudent application of capital. We continue to remain focused on the actions to improve profitability. Very confident about the growth prospects of Solara. Thank you.
We can then take the Q&A, please.
[Operator Instructions] The first question is from the line of [ Rohit Sondra, ] individual investor.
So I have 3 set of questions. So first is that we are back to INR 400 crores of quarterly revenue run rate. And could you please highlight what led to this growth during the quarter? And is this a sustainable base going forward? And given historically, our Q4 has been the strongest quarter, are we expecting a stronger Q4 this year?
My second question is regarding ibuprofen. How is the demand scenario currently for the product? And are you seeing any incremental competition for the product in your target market?
And my last question is on the gross margin side. So what has led to the gross margin improvement during the quarter? And are we confident of achieving 50% gross margin by Q4 as guided earlier? So these are my 3 questions.
Yes. Thank you. So from a revenue point of view, we are confident that we will be able to maintain our INR 400 crores run rate. Our overall business, as I mentioned in our previous calls, we have reset the business at Solara, and we are very confident to get back to our historical revenues as well as to -- on gross margins. So revenue, yes. On the gross margins, yes, that's our aim in terms of getting closer to the 50%, getting to our historical run rate. There are a lot of actions which have been put in place for which we will see the results just not in the Q4, but in the next financial year as well.
We have looked at various markets in terms for our existing products by increasing our market share, which I mentioned, that we have done market extensions. We are probably the only company outside of China who has got the ibuprofen approval in -- for China market.
And coming to the demand for ibuprofen, yes, the demand has come back for ibuprofen. And as I said, probably we are the largest manufacturers of ibuprofen for the regulated market. And it's just not ibuprofen. We have various forms of ibuprofen, the value-added ibuprofen, which we are focusing on, which will lead to expansions in the gross margin.
[Operator Instructions] Our next question is from the line of Mahek Talati with YellowJersey Investment Advisors.
I had a few questions. First is our other expenses have gone up on quarter-on-quarter and Y-on-Y basis. So what has led to this jump? And are there any one-offs during the quarter?
This is in line with that there has been a steep increase in the power charges across the channel in various places of what we manufacture and also due to the normal increase in the inflation -- has resulted in increase in the other expenses. There is no onetime activity charge-off during the current year.
So these other expenses are going to continue next few quarters as well?
Yes, yes, because the power outage and the power charges, even the [indiscernible], which is the major power source for us to power the investments, steep increase in the power charges. And also the installment in other consumables due to current international situation that has been increasing the price, which is I think -- so I think within 1 or 2 quarters, it will get regularized.
Okay. Sir, next question is regarding the CapEx. So what was the CapEx done during the 9 months FY '23? And any major CapEx plans going forward for next 2 years?
No, we only did the normal maintenance CapEx during the current year, and we have deep [indiscernible] the capacities at our new site in Vizag to allow these unfinished agendas and backward integration projects to complete. And we have not formed the long-term capital expenditure plan. Based on the Board approval, we'll be planning it during the next call. We'll be able to explain to you our growth strategy along with the CapEx details for the new projects.
Okay. Fair enough. Sir, there was one question regarding the Vizag plant. So we have started commercial [ supplies ] to less regulated markets. So was there any specific reason that we have not done this before in previous quarters, let's say, 2 quarters back, and in this quarter we have started?
Yes. So I can answer for this financial year. so when we were back in Solara, we have taken all the actions in terms of ensuring certain products which we are manufacturing at other sites to be qualified in Vizag, and all those actions have been taking place. And once we were confident taking the validation batches, we had gone out to seek orders from the less regulated markets. So all these actions for the sales, which happened in Q3, the actions have been taken, initiated in Q1 itself.
[Operator Instructions] Our next question is from the line of Tushar Manudhane with Motilal Oswal Financial Services.
[indiscernible] set of numbers. So just would like to understand the contribution by ibuprofen for the quarter broadly.
No, we don't give contributions of our products on a revenue breakup basis.
So at least if you could share, what are the growth that has come both year-on-year or even on a quarter-on-quarter basis? Any sudden product-specific growth? Or is it more broad-based growth?
We are seeing growth in most of our creditable products, key products. We have seen growth on a quarter-by-quarter basis, and that's reflected in the revenue expansion as well.
Okay. And in Vizag, is this a full quarter impact, so to say, for 3Q in terms of revenue?
I'm sorry, I didn't understand your question. If you can repeat that again, please.
At Vizag, the INR 7 crore sales, is it like we have the entire quarter for the sales or it's just part of the quarter?
So again, for Vizag, [indiscernible] starting off the sales, right? And we are looking at increasing the sales even in Q4.
So like what kind of run rate should we kind of think about Vizag at least for next 12 to 18 months?
We'll have a better answer in the next investor call as we are firming up the plans. Just not for the Q4, but even for the next financial year.
And as you know, Tushar, that we got the CEP approval for ibuprofen from that site. So we are having a site view inspection in this quarter. So that will further enhance that we can supply ibuprofen from Vizag site. So that's an upside we are anticipating.
Got it. And just lastly, if you could help us understand more on the year-on-year basis or at least on a quarter-on-quarter basis, how has been the pricing for most of the products on a blended basis? And how has been the volume growth?
It's stable.
Yes, it's stable. I mean we find it to be stable from a pricing point of view. And yes, volume growth, we are expecting it to happen for our critical products where we have done market extensions.
[Operator Instructions] Our next question is from the line of Nitin Agarwal with DAM Capital Advisors.
On our gross margins. So in the past, when we're doing about INR 400 crores gross margin FY '21 -- around INR 400 crores of quarterly revenues, you were doing gross margins about 56%, 57%. Now in these sort of new dynamics [ as a ] businesses today, I mean, where do you see our optimal gross margins could be for the business over the next few quarters?
So we are working in terms of the gross margin expansion. Now when you compare it to the FY '21 results, we were at the gross margins of 56%. Our aim is to get to that. As I said, we will get back to you on the exact guidance in the next investor call.
Which is fair. I'm saying -- but in terms of aspirationally rather, given where the landscape has changed.
Yes. Our aspiration, of course, is to get to the 50%. It's only about the timing as we firm up the business plan and when do our CIPs also come into play. So we will have a better answer. But yes, the aspiration is to be at minimum 50%.
Okay. And secondly, on the debt part of it, we're still about north of INR 900 crores of net debt. A lot of it essentially is in working capital. Now how are you looking at reduction of net debt number going forward?
Yes. The term loan, you have to think that from INR 414 crores beginning of the year. And now it's INR 352 crores. So INR 120 crores will be the reduction in the term loan every year. And working capital, there is some slight increase to support the increase in the [ sales ] during the quarter 3 and quarter 4. And once the business operation improves, I know slowly we'll be reducing our debt level and get to a comfortable level of [ plan. ]
Sir, what is a debt level that you're comfortable with that's sort of our immediate target on that account?
Yes. First, we want to reach nearly 3x of EBITDA. That's our plan in the next financial year.
[Operator Instructions] Our next question is from the line of [indiscernible] with UTI Mutual Fund.
Hello? Am I audible?
Yes, you are audible, but there's a lot of background noise.
So what is the capacity we have for -- specifically for ibuprofen? And what's the utilization we are having from them?
If I understood your question right, you asked what is the utilization of ibuprofen capacity?
And what is the annual capacity we have for ibuprofen?
So we don't say what's the annual capacity budget. Our utilization of ibuprofen is getting to -- closer to 90% in Pondi facility.
Okay, okay. And capacity, you don't share. Okay. Hello?
Yes?
Do you share the capacity, sir? I just missed out your [ percentage. ]
There is a huge noise coming -- background noise. No, we don't share capacities of our key products.
[Operator Instructions] Our next question is from the line of Gagan Thareja with ASK Investment Managers.
Am I audible?
Yes, you are.
Sir, the first question is regarding the ibuprofen inventories. I think the whole of last 12 months or more has been a phase where there was excess stock of ibuprofen in the channels across regulated and nonregulated markets, which had an impact on both what you could sell to your partners and at the same time what price could be realized. How do these 2 things stack up now versus maybe a year ago?
So our business across just not ibuprofen, but across our products, is much stronger compared to the last financial year. Most of our businesses are direct businesses. There are no onetime sales to any channel partners. And especially coming to your question on the inventory of ibuprofen, whatever was returned has been -- was of good quality, and those same have been sold as the demand has come back. So we are not sitting on any idle inventories of ibuprofen.
And have the prices of key starting materials or intermediates come down? I mean at least qualitatively, that's the feedback we get from quite a few of the chemical companies. And if that is the case and prices -- output prices are firm, is there any reason to then believe that spreads or margins of ibuprofen could actually keep on improving, given the current market situation?
As per our regular trend, there's been no substantial increase or decrease in any of the raw material prices.
Actually, the petroleum products, our [indiscernible] product prices have not come down. And also the metal prices have not come down in the international markets in the current international situation. We expect that by -- within 2 quarters, we expect the normalization of this petroleum product prices.
Okay. And you indicated ibu capacity utilization. Can you give overall aggregate capacity utilization for the company as a whole and maybe split it up on Vizag and the base business?
Capacity would be 77%.
I'm sorry, you were not very clear. Could you repeat that number, please?
Our overall capacity would be 77%.
Across all the sites and products.
Okay. And on Vizag, given there's some sales resuming and you also have a pending inspection due in Q4, for the coming year, would it be reasonable to assume that Vizag would be hitting breakeven in the next maybe 2, 3 quarters for you?
So yes, we did get CEP approval for our ibuprofen. We are awaiting the U.S. FDA inspection. And the goal is, as we are filing new products, which I've already mentioned that out of 2 new products we have filed, we have filed one in Vizag -- so the focus is how to make Vizag breakeven. And we have clearly laid out the plans for Vizag, which overall, it has a big role to play in the growth of Solara.
I mean the perspective I'm coming from is that this quarter, you've hit base business EBITDA run rate of around 17% and you managed to reduce your under-recoveries on Vizag. If you can maintain base business EBITDA run rate and maybe improve somewhat as you enter the next year and as the Vizag under-recoveries sort of reduce -- keep on reducing, would it be fair to assume that you would be in a position to hit high teens to double digit by the exit of next year or maybe earlier?
Overall, for the company, taking into account even for the Vizag and after the R&D costs, from mid- to high teens is what we are targeting.
Okay. All right. And your thoughts and your commentary on the CRAMS piece and the new products, please? And one final question on how should we think of tax rates going ahead.
Tax rate, we are in the higher [indiscernible] but it will be around 20% to 22% is the net effective tax rate.
Okay. For FY '24, should we pencil in 22 -- 20% to 22% is you're saying?
Yes, yes, yes.
Okay. And on your outlook on the CRAMS business and new products introduction?
Yes. So our outlook on the new products, as I said, this year, we are going to file 6. Four are planned during this quarter. We already have a pipeline of 8 products for the next financial year. This is a very important piece for our growth business as well as it helps in the under-recovery of the R&D. R&D is really an investment for us for new products and CRAMS.
Coming to the CRAMS business. We are seeing a good traction in the CRAMS business. Even though today, it is at single digit of the overall company's revenue. But this business is a focus in terms of the growth. We are hiring people in terms of expanding our market reach. We have already done that in the U.S., and we are going to add some new capabilities that would be differentiated. We are just firming up our CapEx plan for the next financial year, which would have a big driver for the CRAMS business.
And then you're almost hitting 77% utilization. I presume it would be 80%, 85%, and then you'll need to add capacities, which means by the time you're in the middle of next year or so, you will be looking to invest in additional capacities. Any thoughts on the investments that would be required that you can share?
So I just want to reiterate, without Vizag, it's -- capacity utilization is 77%. So we have base business also growing. And with Vizag, we have capacities in terms of catering to our demand. And I meant CapEx in terms of -- for the CRAMS in terms of the differentiated technology, that would be initially more from an R&D perspective. That is not going to be a huge CapEx. But definitely, if we are going to win some RFPs on the R&D side, then there would be a possibility to expand that on the commercial side. But we are going to be very cognizant in terms of how we are going to invest in the CapEx for the future growth of Solara.
And what could be the peak sales potential from the Vizag side?
Can you repeat the question?
What could possibly be the peak sales potential of the Vizag plant at full utilization?
So with the investments, what we have made right now, as a peak sales, if it plays out to our plan, Vizag revenue could generate at least about INR 300 crores to INR 400 crores.
[Operator Instructions] Our next question is from the line of Pooja Rathi with YellowJersey Investment Advisors.
So I wanted to ask, could you give an outlook on revenue and EBITDA margin for coming 2 to 3 years?
As I said, we are just firming up our plans. We'll have a better guidance in the next investor call.
[Operator Instructions] Our next question is from the line of [ Janis Shah, ] investor.
Just wanted to get some understanding about the business structure. I mean you have, I think, close to 60-plus kind of products, which are already there in the portfolio. And in terms of markets, 72% of the revenue coming from the regulated one, and you aspire to add more. So I'm just trying to understand from a concentration perspective, in terms of the product and the market concentration, how does this stack up?
And we hear from you that your focus markets will be more like Latin America or China. Then we just need to understand like how does the -- businesses -- is being aligned for future. Can you just give that one -- I mean, some understanding with that?
And second question is also if we can give a broader outlook or maybe an update on how the global market has been in the shape. We hear more from challenges like European countries already facing in terms of manufacturing. And even given the growth slowdown, which has been expected across various economies, in such environment, like what's your assessment in that?
See, from a business point of view, the way we are looking at -- from the current products, we do have certain products which are right now filed only in one market. And there are potentials for other markets as well. Hence, the reason why we are doing market extensions of some of these products to increase our market share. As we want to derisk -- so the way we look at it is we want to derisk our product portfolio, the dependence on products as well as dependence on market.
And when you look at the overall Solara revenue, I think we are well placed from a global perspective where we have good presence in North America, Europe and Asia Pacific regions, which is more driven by Japan and South Korea.
The territories where we have a marginal presence but the opportunity is large, and that's where we are looking at focusing on Brazil and China. Of course, there are other markets also, which we would like to increase our market share, just not for existing products, but for new products as well. So summarizing your questions, yes, the goal is to derisk both the product portfolio as well as derisk dependence on customers as well as on the markets.
On the second question, you asked about the global slowdown. I mean, for the products, what we have in place, we have not, in fact, seen any slowdown at all. In fact, it's come back in terms of the demand. So I don't have any specific or more answer to that question, but I can say that, yes, we are very upbeat in terms of how the business is progressing for Solara.
Okay. Okay. And in terms of the debt, you said you'll be repaying INR 150 crores of term loans every year, right? That's what -- is it correct, which I'm [ taking? ]
Yes, INR 120 crores.
Our last question is from the line of Mahek Talati with YellowJersey Investment Advisors.
Just one question. When are we expecting the U.S. FDA approval for our Vizag facility?
We are also keenly waiting for the outcome.
As there are no further questions, I would like to hand the conference over to the management for closing comments.
Thank you, everyone, for taking your time to join us for this investor call. We look forward to our Q4 call and the year as a whole in the coming months. Thank you once again.
On behalf of Solara Active Pharma Sciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.