Any current/future new fundraising through debt or equity?

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.

Any current/future capex/capital investment/strategic investment?

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. T

Future growth expectations in sales/revenue/volumes?

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,

Future growth expectations in earnings/operating earnings/profits/EPS?

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 l

Current/ Expected Orderbook/ Pending Orders?

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

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Morepen Laboratories LtdQ3 FY24Pharmaceuticals & Biotechnology

Morepen Laboratories Ltd Q3 FY24 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹58.2P/E: 30.1Market Cap: ₹2.3K CrSector: Pharmaceuticals & Biotechnology

Management growth scorecard

Revenue

Category 3

Margin

Category 1

Fundraise

Yes

Order

N/A

Capex

Yes

3 of 4 growth signals are positive.

Full analysis

Revenue 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.

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.

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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.

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.

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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