Thread by @ValueEducator

#Lauruslabs Q2 23 Concall Highlights 💊💊

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1. FDF business segment was subdued in Q2 23 due to lower ARV formulation volumes and adverse pricing dynamics in API and formulations

2. Supply chain logistics slightly eased in this qtr, driving moderation in imported raw material prices

3. Management Expecting 30% EBITDA margins with 90% of $1 billion revenue target ( 6400 Cr ) in FY 23

4. Reason for reduction in guidance : change in competitive situation , adverse pricing situation in ARV APIs and offtake in ARV formulations

5. Generic FDF revenue down by 70% YOY [Vs Q2 22] for H1 revenues were down by 51%

6. ARV APIs showed good growth 477 cr in Q2 23 vs 339 Q2 22. H1 23 : 790Cr vs 750 Cr H2 22

7. Oncology segment de-grew in Q2 23 but expected to show growth in FY 23
51 Cr sales in Q2 23, decline of 30% YOY while for H1 decline of 14%. It’s temporary phenomenon but management is expecting to grow significantly in next 6 months.

8. Revenues from generic APIs 680 Cr vs 527 Cr

Synthesis business did very well ( 720 Cr vs 155 Cr)

Bio segment revenues of 27 cr vs 26 cr in FY 22

9. ARV : Pricing remained very depressed in Q2. Laurus Labs continued to remain calibrated in its bidding approach to ensure better profitability for the business. Expecting good offtake in H2 as the situation is getting stabilized.

10. Filled 2 ANDAs in Q2 23 and received 4 approvals (3 final and 1 tentative )
Validated 3 products in EU for Contract Manufacturing

11. Commissioned total 10 billion capacity in Q2 23, there is a room to expand formulation capacity by another 5 billion,that may happen in FY 24

12. Investing in complex generics. Developed novel drug delivery for paediatric HIV and will be filling NDA for it in Q3 23

13. Commissioned sterile R&D, currently 30 scientists are working on it.

14. 14. Greenfield R&D centre for synthesis division at hyderabad and 3 manufacturing units in vizag under laurus synthesis private ltd is progressing according to timelines

15. Capex - Invested 416 cr in H1. Guidance of 2000 cr in 2 year in all business segment

16. 500 cr of revenues from formulations At peak utilization of 5 billion capacity. Expecting 75% utilization of 10 billion units for formulation in FY 23. From 10 billion to 15 billion capacity expansion it will take 12 months vs 24 months for greenfield capacity.

Not investing in 5 billion capacity in this financial year. Out of Old 5 billion capacity 3 billion is non ARV and 2 billion is Non ARV. In Q2 23 Laurus labs got 100 cr of revenues from Non ARV with 3 billion capacity. ARV and Non ARV capacity is fungible

17. 47 approved products with market size of 21 billion out of that 14 molecules are launched till now with addressable market size of 2.5 billion

18. Operating deleverage played in this qtr due to fall in volumes of ARV formulations
Synthesis > formulations margins

Better sales will results in better margins
19. Laurus Labs didn't adjust the pricing for ARV that's why they lost a lot of tenders but now after calibration pricing is at PAR with competitors. Laurus will be participating with new tenders

20. ARV sales in Q2 23 is 53 cr vs 275 cr in Q2 22. 80% decline

21. In H1 23 most of the ARV tenders which came for tendering were not long term, which laurus labs not able to win. In Q3 23 long term contracts for ARV will be announced.

22. 75% market is long term while 25% market is non long term. While from last 3 qtrs tenders were from non long term due to channel stocking

23. Making cost effective API for ARV is challenging while anyone can make formulations for ARV

24. In long term ARV contracts no manufacturer gets more than 1/3rd share while in short term contracts there is no limit.

24. Expecting 30% EBITDA margins for FY 23 as ARV segment as contribution will decline and other segments ( Synthesis ) have better margins than ARV

25. Laurus labs is going to start a Speciality chemical division as backward integration. Large, Medium and small volume products will be manufactured. ( Pricing $1 to $100 )

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