Q2FY23 Earnings Update
Strides Pharma Science Limited November 14, 2022
Strides reports improved Q2FY23 results led by 690bps gross margin expansion; returns to positive adjusted PAT
Quarterly Performance (₹m)
Particulars | Q2 FY23 | Q1 FY23 | Q2 FY22 | QoQ | YoY |
Revenues | 8,995 | 9,457 | 7,360 | -5% | 22% |
Gross Margin | 5,125 | 4,741 | 4,113 | 8% | 25% |
Gross Margin % | 57.0% | 50.1% | 55.9% | 690bps | 110bps |
EBITDA | 1,006 | 657 | 10 | 53% | 100%+ |
EBITDA % | 11.2% | 6.9% | 0.1% | 430bps | 1,110bps |
Half Yearly Performance (₹m)
Particulars | H1 FY23 | H1 FY22 | YoY |
Revenues | 18,452 | 14,279 | 29% |
Gross Margin | 9,865 | 7,541 | 31% |
Gross Margin % | 53.5% | 52.8% | 70bps |
EBITDA | 1,663 | -458 | 100%+ |
EBITDA % | 9.0% | -3.2% | 1,220bps |
We continue to make good strategic progress across all our key businesses with a sharper focus on execution and cost competitiveness. We have delivered an improved sequential performance led by gross margin expansion. Our cost control measures have started yielding results and have enabled strong operating leverage during the quarter.
Our US business has reported its best ever quarterly performance, driven by improved market share for the base portfolio, an uptick in the acquired portfolio at Chestnut Ridge, and contribution from new launches. We expect the new launch momentum to pick up in the coming quarters as we leverage a vast portfolio of over 100 approved products undergoing cost improvements and manufacturing site changes in the near term.
We have completed the strategic review of the Other Regulated Markets (ORM) business and have decided to exit several low-margin product lines resulting in a lower topline during the quarter. The long-term outlook for the ORM business continues to be robust, and we expect to get to the historical levels of revenues with superior gross margins as early as Q3FY23.
With all the levers in place, we expect to continue our growth momentum in coming quarters with a focus on improved margins, free cash flow generation, and significant deleveraging of our balance sheet, targeting a net debt to EBITDA of less than three times.
Arun Kumar
Founder, Executive Chairperson & Managing Director
2
Q2FY23 reported revenues up 22% YoY with the US business reporting its best ever quarterly performance
Market Wise Performance- Quarter on Quarter (₹m)
Particulars | Q2 FY23 | Q1 FY23 | Q2 FY22 | QoQ | YoY |
US | 4,726 | 3,552 | 2,502 | 33% | 89% |
Other Reg Mkt | 2,414 | 3,047 | 2,825 | -21% | -15% |
Total Reg Mkt | 7,140 | 6,599 | 5,327 | 8% | 34% |
Inst. Biz | 1,035 | 2,013 | 1,113 | -49% | -7% |
Africa | 820 | 845 | 920 | -3% | -11% |
Total EM | 1,855 | 2,858 | 2,033 | -35% | -9% |
Total | 8,995 | 9,457 | 7,360 | -5% | 22% |
Market Wise Performance - Half Yearly (₹m)
Particulars | H1 FY23 | H1 FY22 | YoY |
US | 8,278 | 5,518 | 50% |
Other Reg Mkt | 5,461 | 5,057 | 8% |
Total Reg Mkt | 13,739 | 10,575 | 30% |
Inst. Biz | 3,048 | 2,083 | 46% |
Africa | 1,665 | 1,621 | 3% |
Total EM | 4,713 | 3,704 | 27% |
Total | 18,452 | 14,279 | 29% |
US business reports
its best-ever
quarterly
performance
Focus on profitable
outcome for the Other regulated markets
Lumpiness during the quarter driven by institutional business
Healthy expansion
in operating
margins driven by operating leverage
3
- US revenues at ₹4,726m ($60m) for Q2FY23, up from ₹3,552m ($46m) in Q1FY23 and ₹2,502m ($34m) in Q2FY22.
- US business contributed 52% of consolidated revenues in Q2FY23.
- Scale up in the US business driven by improved market share and volume traction across key molecules in our portfolio
- Other regulated markets revenues at ₹2,414m ($31m) for Q2FY23, versus ₹3,047m ($39m) in Q1FY23 and ₹2,825m ($38m) in Q2FY22. Other regulated markets businesses contributed 27% of consolidated revenues in Q2FY23.
- A strategic review of the business has led to exiting low-margin P&Ls which do not add strategic value and a change in the operating model for certain B2C-led small regions to a B2B model.
- The business is expected to return to historical levels with superior margins starting Q3FY23.
- Emerging markets revenues at ₹1,855m ($23m) for Q2FY23, versus ₹2,858m ($37m) in Q1FY23 and ₹2,033m ($28m) in Q2FY22
- Emerging markets business contributed 21% of consolidated revenues in Q2FY23.
- While the branded business is tracking to plan, the institutional business was lumpy as the long-term institutional contracts have come to a close. The new awards are expected to be announced in Q3FY23, with potential supplies starting Q1FY24. Consequently, the business will remain soft for H2FY23
- Margin expansion in Q2FY23 was driven by healthy operating leverage versus 7% in Q1FY23 and 0.1% in Q2FY22.
- Significant actions around manufacturing network optimization, operating cost reduction, and aggressive right sizing across P&Ls have been completed, and the same has started contributing to the operating margins.
- Softening of the freight cost and better supply chain management led to a reduction in logistics cost to ₹569m (6% of revenues) in Q2FY23 from ₹897m (12% of revenues) in Q2FY22
Market Wise Outlook
US Business reports its best-ever quarterly performance at $60m revenues
US Revenues - Quarterly Trend ($m) | |||||||
54 | 55 | 58 | 60 | ||||
50 | |||||||
44 | 46 | ||||||
41 | 38 | ||||||
34 | |||||||
Q1FY21 | Q2FY21 | Q3FY21 | Q4FY21 | Q1FY22 | Q2FY22 | Q3FY22 | Q4FY22 | Q1FY23 | Q2FY23 |
Quarterly Updates and Business Outlook
• Revenues from the US for Q2FY23 stood at ₹4,726 ($60m), up 33% QoQ and 89% YoY, |
representing 52% of consolidated revenues for Q2FY23. |
• Witnessing improvement in base business driven by pick up in volumes for key molecules that are |
now mean reverting to pre - covid levels. |
• The uptick in the acquired portfolio at Chestnut Ridge further contributed to the growth |
momentum in the US during the quarter. |
• Over the last two quarters, we have exited several contracts that did not meet our margin criteria |
as we continue to build our business with a focus on profitability |
• Our portfolio is now seeing a stable pricing environment |
• Launched 7 products in FY 23 and new launch momentum will pick up in the coming quarters. |
• We are confident of meeting our revenue outlook of US$250m run rate in FY23 for the US |
Quarterly Performance ($m)
60
46
34
Q2FY22 | Q1FY23 | Q2FY23 | |
QoQ% | YoY% | ||
33% | 89% | ||
Six Months Performance ($m)
106
75
H1FY22H1FY23
YoY%
50%
business. |
Portfolio Overview
• US business has a basket of 280 ANDAs, including the acquired portfolio through the Endo transaction. The portfolio comprises a healthy mix of acute and chronic products, including domains of Controlled Substances, Hormones, and Nasal Sprays.
• Of the total ANDAs, 260 are approved, 20 products are pending approval with the USFDA, and over 65+ products have been launched.
• A large basket of approved products will ensure lower dependency on new ANDA filings and approvals in the near term; this will enable more focused R&D initiatives around narrow niches.
• Target to launch ~ 20 new products every year & 60+ launches over three years with a relentless focus on cost competitiveness through alternate vendor developments, site changes,
QoQ and YoY growth comparison in ₹ reported
5
and process improvements
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Strides Pharma Science Ltd. published this content on 09 February 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 February 2023 10:35:06 UTC.