In today’s briefing:
- Biocon- Management Meet Update
- Camlin Fine Sciences – Execution Is the Key
- CCL Products (India) – Spray-Dried Demand Visibility Remains Strong
- Dr. Reddy’s Laboratories – Management Meet Update
- Hero MotoCorp – Improving Rural Sentiments to Support Volume Recovery; Growth Drivers in Place
- Indoco Remedies- Management Meet Update
- J B Chemicals and Pharmaceuticals – Management Meet Update
- Kansai Nerolac – Weakest Among Peers; Pain Seems Priced In
- Oil India – Lower Dry Wells and DD&A Drive PAT Beat; Production Grows
Biocon- Management Meet Update
- Biosimilar Business: If all goes well, the closure of Viatris transaction (acquisition of its biosimilar portfolio) may happen as early as 2HFY23.
- The acquired business would have a topline of US$800mn and EBITDA of US$175mn.
- Biocon will be able to build on the Viatris acquisition as it has multiple launches lined up in the biosimilar space and the same should help it to build on the base.
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Camlin Fine Sciences – Execution Is the Key
- The management indicated that in their diphenols capacity, mix between HQ and Catechol cannot be skewed beyond a point (say, 55:45) and hence it has to produce Catechol, which is undergoing demand and pricing pressure.
- Currently, CFIN is operating at US$1.5/kg loss in Catechol.
- Vanillin capacity is expected to be commissioned in July’22, post which Catechol would be used for captive use and the same would arrest margin pressure.
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CCL Products (India) – Spray-Dried Demand Visibility Remains Strong
- Management indicated that decline in EBITDA/kg in FY22 was mainly on account of mix change in favour of spray-dried and increase in cost items like power & fuel, freight etc. 30% of the contracts in the B2B business are on CIF basis.
- Small packs capacity expansion (increase by >3x) has been completed and management believes that ~50% capacity would be utilized for captive purposes while the rest will be used for exports.
- Demand for freeze-dried coffee remains soft on account of downtrading in different regions globally and capacity addition at the industry level.
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Dr. Reddy’s Laboratories – Management Meet Update
- Russia Business: DRL’s business was strong in 4QFY22, partially due to overstocking, which should normalize in 1QFY23.
- India Branded Prescription Business: DRL is aiming to keep improving its ranking in the IPM.
- Novartis brands’ acquisition: The acquired brands will be promoted with a mix of existing field force and addition of new salesforce.
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Hero MotoCorp – Improving Rural Sentiments to Support Volume Recovery; Growth Drivers in Place
- The company sees the overall demand sentiment improving and is experiencing some early signs of demand recovery in both Rural as well as Urban areas.
- It expects double- digit growth in volume as all medium term and long term triggers are in place.
- Demand is recovering on the back of festive and marriage season, which is going really well, and retail volume has outdone wholesale volume, leading to correction in inventory levels, which are lower than 6 weeks now.
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Indoco Remedies- Management Meet Update
- Domestic Business: The domestic business growth should be driven by new launches, price increase (6%) and volume growth.
- US Business: Indoco’s solid oral dosage portfolio has not seen much price erosion.
- Inflationary pressures are easing, but still not fully normalised: The company acts as a contract manufacturer for several of its products in Europe and it has been able to pass on the cost increases in these products.
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J B Chemicals and Pharmaceuticals – Management Meet Update
- CMO Business: JB Chemicals is the largest lozenges manufacturer in India with a capacity of 150cr units.
- Reiteration of FY23 guidance: Expected future revenue growth in mid-teens and EBITDA margin expansion to 24-26%. R&D expense as a % of sales should not exceed 3%.
- Domestic Market Reach: The company reaches out to a doctor base of 3,00,000 and a sales force of ~2,500 MRs with a large presence in Tier 2 and Tier 3 cities/towns, which make up ~40% of domestic sales.
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Kansai Nerolac – Weakest Among Peers; Pain Seems Priced In
- Q4FY22 highlights: Standalone revenue grew 6% YoY to INR 14.1bn (in-line).
- In decorative segment, volume declined 7-8%/value remained flat YoY in Q4; performance continued to lag the top two.
- FY22 price hikes in decorative/industrial coatings stood at ~21/18%. Product portfolio continued to expand. Distribution grew 10% YoY in FY22.
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Oil India – Lower Dry Wells and DD&A Drive PAT Beat; Production Grows
- Highlights: Standalone employee costs were 29% below our est. (down 22% yoy/9% qoq), but Other Expenditure was 20% above our estimate due to higher sundry expenses and provisions (down 5%/8%) in Q4FY22.
- DD&A was down due to a 70% decline in depletion. Other Income fell 63% yoy to Rs4.9bn, a 34% miss (from lower dividends).
- The tax rate was lower at 20%. For FY22, OIL reported S/A EBITDA/PAT of Rs53.7bn/Rs38.9bn, up over 4x/2x, driven by higher realizations.
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