Morepen Labs. Q2 FY24 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 1
Fundraise
Yes
Order
N/A
Capex
Yes
3 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- Expectation of double-digit growth in sales/revenue over the next two quarters and next financial year (FY 24-25).
- FY 2023-24 expected to improve significantly from last year; FY 24-25 to show even better performance.
- Growth drivers include API business, medical devices (fast-growing), and finished dosage/formulations (steady growth with expansion efforts).
- API segment CAGR around 20%, current revenues INR415 crores with plans to add new products and expand capacity.
- Medical devices segment showing 41% revenue growth and expected to grow faster.
- Formulation business growing steadily, currently stable at INR100 crores, with plans to expand to INR200-300 crores before market listing.
- Overall CAGR target of 15%-20% in the medium term.
- Emphasis on slow and steady growth with EBITDA margins expected to reach double digits next financial year.
See what Morepen Labs. management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- Morepen Laboratories plans a capex of INR 125 crores for the API business.
- To fund this capex, the company is considering raising funds either through debt or equity.
- The preference is to raise funds through debt since their equity is already very high.
- No new borrowing has been done in the past 25 years; capex so far was funded from internal cash flows.
- Future funding plans indicate funding capex through debt rather than equity to maintain capital structure.
See what Morepen Labs. management said on order book — free account, 30 seconds.
Capex plans
Yes- Morepen Laboratories has planned a capex of INR 125 crores specifically for the API business in the next 2-3 years, which they intend to fund primarily through debt due to already high equity levels.
- For the medical devices division, there is an additional capex requirement of INR 50 to INR 75 crores, funded through internal cash flows.
- The company is continuously expanding capacities in API and formulations, with recent capacity expansions done in the last quarter.
- A new R&D center has been developed, and a formulation export facility is expected to be operational within the next 18 months.
- The company is focused on slow and steady growth, investing in regulatory capabilities, capacity, machinery, and talent to sustain long-term growth.
- Plans include expanding the frontend sales team and growing the formulation business alongside API and medical devices.
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Margin guidance
Category 1- Company expects double-digit growth in revenue in the next one to two years, driven by improvements across all business segments including API, medical devices, and formulations.
- EBITDA margins targeted to reach double digits (around 10-12%) in the next financial year, improving gradually from current levels (~8%).
- Profit before tax and profit after tax have shown strong growth recently: PBT up 29% and PAT up 34% quarter-on-quarter; 61% and 67% respectively on half-year basis.
- Formulation business currently impacting margins but expected to stabilize and contribute positively to bottom line from next year onwards.
- Employee costs increasing but overall expenses under control, supporting margin improvement.
- Earnings per share (EPS) expected to improve as operational efficiencies and revenue growth stabilize; better bottom line expected in the next two years.
- Growth will be steady and sustainable, avoiding aggressive fast moves, with focus on capacity expansion and diversified revenue streams.
Order book
- The company has a product pipeline valued at approximately $67 billion in the formulation market.
- Despite market discounts, the residual market size is expected to be around $6-7 billion.
- Morepen aims to capture about 10% market share in these products, which could translate to $500-$600 million in revenues in the coming years.
- Currently, 41 products are live; 7-8 are regularly sold, about 30 are new, with some 20 products in the pipeline.
- Market share for existing products is strong: e.g., Loratadine at 70% and Montelukast at 48%.
- Most products in the pipeline expire post-2025, aligning with business expansion plans.
- The company is working on expanding its frontend sales teams and capacity to support growth.
- Orders and sales volumes are expected to improve as capacity expands and market conditions stabilize.
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What Morepen Labs.'s management said in earlier quarters
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