Thread by @ValueEducator

Key highlights from Piramal Pharma Q4FY23 concall

CMP - ₹82.6

Like and retweet for maximum reach!!

#pplpharma #piramalpharma #pharmastocks

• CDMO business muted growth was due to macroeconomic factors resulting in delayed decision making and slowdown in biotech funding. There was also muted demand for the vitamins, minerals and generic API portfolio.

• EBITDA Margin for the year was at 12%. Adjusting for non-recurring items such as near expiry inventory provision of ₹92 Cr on account of lower demand during COVID-19 pandemic and one-off provision for receivables from a biotech customer of ₹32 Cr, the Adjusted EBITDA

margin for the year is 15%.
• Margins have been impacted in the CDMO business due to lower revenues and a large fixed cost base, higher raw material costs, higher energy costs and higher marketing costs. Operating costs were also higher due to expanded capacities at key sites.

• The employee expenses have seen a rise of 17% and eliminating FX impact it is 14%. This is because they added 650 employees during the year to fill up open positions and operate new capacities that are about to be commercialized.

• They saw higher demand for their differentiated capabilities such as peptides, ADCs, HPAPIs, potent sterile injectables, and hormonal products. They have aligned their capex during the year towards these capabilities.

• Revenue contribution from differentiated offerings increased to 37% in FY23 from 27% in FY21.
• They did a capex of ₹965 Cr across sites like Riverview, Grangemouth and Ahmedabad.

• They are witnessing a demand revival in the CDMO business. There have been more client RPs for integrated multi-site campaigns. They are also seeing healthy purchase orders for recently approved on-patent commercial products.

• The inhalation anesthesia portfolio, especially Sevoflurane, is experiencing high demand in non-US markets. Accordingly, they have been increasing the capacity to manufacture these products.

• As per IQVIA, they continue to have the leading market share in Sevoflurane in the US in terms of value at 39%. They also continue to have a leading market share in their intrathecal portfolio in the US.

Growth in injectable anesthesia was impacted by supply constraints at their CMO. They are working with the CMO partners to address this and have seen better traction in production during Q4 FY23.

• Profitability of the CHG portfolio was affected by provision for near-expiry inventory due to low demand because of Covid.
• The Indian Consumer Healthcare business saw good growth despite a high base in FY22. The growth was primarily driven by power brands.

Power Brands contributed to 42% of the total ICH business during the year.
• They continue their strategy of high spending on media and trade promotion to drive sales for power brands.

• They are seeing higher demand at the Morpeth site than they have in the recent past. They have been successfully dealing with the operational issues at the site and it is expected to start contributing to CDMO profitability soon.

• They are seeing some pricing pressure in the inhalation anesthesia portfolio as they are generic products. But they have been doing some capacity expansions which will be visible at the Bethlehem site in the near term and the Digwal and Dahej sites will be visible in the

medium term. They are confident of maintaining healthy gross margins in this business.
• They are also seeing that there is a general increase in the use of Sevoflurane and a decline in the use of Desflurane. The management expects this trend to continue and they are well

positioned to capitalize on this change.
• In the CHG segment, the company only makes inhalation products. The rest of the product portfolio is manufactured by CMOs.

Join the Micro Cap Club:
bit.ly/3zYY8OS