Fermenta Biotech LtdQ2 FY21Pharmaceuticals & Biotechnology

Fermenta Biotech Ltd

Q2 FY21 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

→Human nutrition (Vitamin D3) volumes grew ~70% YoY in Q1 FY22, driven partly by COVID-related demand and increased awareness of immunity benefits.
→Management expects continued strong double-digit growth in human nutrition volumes, though not at the unsustainable 70% level.
→Animal nutrition volumes declined ~64% YoY due to pandemic and African swine flu impacts but are expected to recover as global economies reopen.
→The company anticipates stable or improving prices for human Vitamin D3, with supply capacity expected to be fully utilized after a 20% expansion within the current financial year.
→Fermenta USA acquisition provides access to a larger dietary and nutrition market, with plans to expand manufacturing and product basket, including premixes, over the next 12 months.
→Long-term revenue CAGR target is approximately 15% with an EBITDA margin around 25%.

Margin guidance

Category 3

→Fermenta Biotech targets a long-term CAGR revenue growth of around 15% over the next five years.
→The company aims to maintain an EBITDA margin of approximately 25% in the long term.
→For Q1FY22, revenue increased by ~16% year-on-year and EBITDA grew by ~15% year-on-year, indicating positive momentum.
→Net profit after tax (PAT) for Q1FY22 was ₹11 crore, representing a 53% increase quarter-on-quarter, though down 17% year-on-year due to tax adjustments.
→Capacity expansion (notably 20% increase in human vitamin D capacity) is expected to be fully utilized within the financial year, supporting future growth.
→Management remains optimistic about sustained double-digit volume growth in human nutrition vitamin D3, driven by increasing market demand post-COVID.
→The company refrains from giving specific forward-looking margin or ROE guidance but focuses on steady growth and profitability improvements.

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Fundraise plans

→The transcript does not mention any current or planned fundraising through debt or equity.
→No discussions or statements about raising capital via equity or debt were made during the Q1FY22 results conference call.
→The focus was on capacity expansion through internal funds and existing resources, such as greenfield projects in Saykha.
→Management discussed evaluating CapEx requirements but did not reference external fundraising.
→Overall, no specific information about new fundraising plans is provided in this transcript.

Order book

The transcript does not explicitly mention the current or expected order book or pending orders for Fermenta Biotech in Q1FY22. However, some relevant insights related to business outlook and capacity are: - Human nutrition volumes grew by around 70% year-on-year in Q1FY22, indicating strong demand. - Capacity utilization on the human side is close to 100%, with a 20% capacity expansion expected to be utilized within the financial year. - The company is optimistic about volume growth in human nutrition and expects animal nutrition demand to recover post-pandemic. - Fermenta USA contributed top line of approximately ₹9 crores in the quarter, with plans to expand value-added product manufacturing. - The company is evaluating greenfield projects to expand vitamin D3 capacity and overall product basket. No specific order book or pending order numbers were disclosed during the call.

Capex plans

Yes

→Fermenta Biotech has recently completed backward integration for cholesterol, with a substantial property, plant, and equipment increase of about ₹60-65 crores in FY21.
→Around ₹35 crores in Capital Work-in-Progress (CWIP) relates to capacity expansion capitalized in Q1 FY22.
→A 20% capacity expansion specifically for human vitamin D3 is completed and expected to be fully utilized within the current financial year.
→Further incremental capacity expansions at the current Dahej plant are not possible due to space constraints.
→New greenfield projects are planned at Saykha (10 acres of land and environmental permissions in place).
→The company is evaluating product baskets for the Saykha project, including vitamin D3 expansion.
→The total capex for the greenfield project will depend on the product mix.
→These projects aim to reduce dependence on vendors, strengthen security, stability, and cost-effectiveness.

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