GuruFocus - Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ajanta Pharma Ltd (BOM:532331) reported a healthy revenue growth of 15% in Q2 FY 2025, driven by strong performance across its business verticals.
- The Branded Generics business, which constitutes a significant portion of the company's revenue, grew by 20% during the quarter.
- The company achieved a cash conversion ratio of 121%, indicating efficient management of its working capital cycle.
- Ajanta Pharma Ltd (BOM:532331) declared an interim dividend of INR28 per share, reflecting a strong commitment to shareholder returns.
- The company's gross margin improved by 200 basis points to 77% in H1 FY 2025, supported by a higher contribution from the Branded Generics segment.
- The US Generics segment experienced a slight decline in sales by 2% in Q2 FY 2025, reflecting ongoing challenges in this market.
- Ajanta Pharma Ltd (BOM:532331) reported an increase in personnel costs by 25% in H1 FY 2025, partly due to a one-time charge related to a change in gratuity policy.
- The company's US Institution business remains unpredictable due to reliance on procurement agencies' schedules and funding.
- Forex losses impacted other expenses, with a notional loss of INR26 crore in Q2 FY 2025.
- The company anticipates a tapering of growth in the Africa region in the second half of FY 2025, which may affect overall revenue growth.
A: Rajesh Agrawal, Joint MD: The increase in SG&A costs is due to strategic additions in medical representatives, particularly in dermatology, pain management, and cardiovascular segments. This expansion is expected to help us continue outperforming the IPM in volume growth. Arvind Agrawal, CFO: The SG&A expenses for the half-year are reasonable, and the increase is in line with our expectations.
Q: What is the strategy for building the domestic franchise with the strong cash generation observed?
A: Rajesh Agrawal, Joint MD: We plan to add more medical representatives to current specialties and explore new specialties. Decisions on entering new specialties will be made in the next six months, and it will be a mix of both strategies.
Q: How sustainable is the 16% growth in the India business, and what is driving growth in the Asia region?
A: Arvind Agrawal, CFO: The India business growth is around 9% to 10%, not 16%. Yogesh Agrawal, MD: Growth in Asia is driven by increased market share, new product launches, and field force expansion. We expect this growth rate to continue.
Q: What is the strategy for the US business, and what can be expected in terms of run rate and new launches?
A: Yogesh Agrawal, MD: The US business is expected to grow at a mid-single-digit rate this year, with more launches planned for the second half. The run rate may be slightly higher in upcoming quarters, and growth rates could improve next year with more approvals.
Q: How should we view the second half of fiscal '25 in terms of revenues, especially with the expected growth in Africa and India?
A: Yogesh Agrawal, MD: We expect mid-teens growth for the Branded Generics business overall. While growth rates in different territories may vary, the combination of India, Africa, and Asia should achieve this target. The US business will see low to mid-single-digit growth, and the institution business remains unpredictable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.