Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Laurus Labs Ltd (BOM:540222, Financial) reported a healthy gross margin of 55% for Q2, indicating strong product mix and operational efficiency.
- The company has commenced operations at a new R&D center in Hyderabad, enhancing its development and manufacturing capabilities.
- Laurus Labs Ltd (BOM:540222) is working on over 90 active projects, with a significant focus on human health, animal health, and crop production.
- The CDMO division recorded an 8% growth, driven by resource allocation towards high-value complex programs.
- The company successfully passed multiple quality audits, including a US FDA inspection, without any critical findings, showcasing its commitment to quality standards.
Negative Points
- EBITDA margins were subdued at 15% due to lower asset utilization and dilution from growth initiatives.
- Generic API revenues declined by 11% in Q2, primarily due to lower demand in the oncology portfolio and a planned facility shutdown.
- The company is experiencing operational leverage issues, which have been affecting margins for several quarters.
- Debt levels have increased to INR 2,700 crore, with operating cash flow remaining negligible in the first half.
- The formulation division saw a marginal 2% decrease in revenues, impacted by lower volume uptake in certain markets.
Q & A Highlights
Q: How is Laurus Labs coping with increased competition in the oncology API segment?
A: Satyanarayana Chava, CEO, stated that the lower sales are due to delivery schedules rather than competition. The company does not foresee challenges in achieving growth over the last year.
Q: What is the outlook for the CDMO division and its impact on Laurus Labs' growth?
A: Satyanarayana Chava, CEO, mentioned that the CDMO division is expected to see significant growth in the second half of the financial year, driven by scheduled project deliveries. The division has already achieved INR 530 crore in H1 and anticipates further growth.
Q: Can Laurus Labs achieve the 20% EBITDA margin target for FY25 despite current challenges?
A: Satyanarayana Chava, CEO, confirmed the commitment to achieving a 20% EBITDA margin for the entire financial year, with expectations of improved performance in the second half.
Q: What is the company's strategy for managing debt and funding capex plans?
A: Ravikumar V, CFO, stated that the debt will remain below INR 3,000 crore, and the capex plan will be funded through internal accruals and operating cash flow, which is expected to improve.
Q: How does Laurus Labs plan to address the operational leverage issue that has persisted for several quarters?
A: Satyanarayana Chava, CEO, explained that the operational leverage issue is due to planned investments in new areas and future demand. The company is nearing the end of this phase and expects leverage to improve in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
