Capitaline

Analyst Meet / AGM 22-Oct-13

Conference Call

Unichem Laboratories

Expects NLEM impact in Q3 and Q4 may not be same as Q2

Unichem Laboratories announced the results for the quarter ended September 2013 and held a conference call to discuss the results and future growth strategies. The key takeaways of the call are as follows.
Highlights of the call

The Company's standalone revenue grew by 2% YoY to Rs 269.57 crore for the quarter ended September 30 2013 primarily driven by the 9% growth in International business to Rs 63.35 crore.
However, the domestic branded formulation business grew by subdued 1% YoY to Rs 173.9 crore for the same period. The Revenues from API business fell by 7% YoY Rs 28.90 crore for the quarter ended September 30, 2013. The API's volume growth is high but diverting some of it to the captive consumption during the quarter.
The Company's EBITDA margins impacted due to the implementation of lower notified prices on NLEM products, higher spending on continuing medical education (American Society of Hypertension), power and fuel and international freight during the quarter.
The Domestic Formulation market on MAT September 2013 is estimated at Rs 72343 crore {with bonus units at full value} by AWACS, reflecting a growth of 6.8% over MAT September 2012. Further, the Domestic Formulation Market stood at Rs 19140 crores for the quarter ended September 30 2013 {July to September} reflecting a growth of 2.8% over quarter ended June 30 2013.
The Unichem Laboratories revenue is estimated at Rs 725 crore (AWACS MAT September 2013) and growing at 4.5% with a market share of 1.0% (in covered market 2.0%).
It has filed 29 ANDA's with US FDA and received 15 approvals (2 tentative approvals) as on date. It has already launched 10 products and balance products to be launched in Q3.
Recently, The R&D shifted to Goa plant and witnessed some stabilization. It expects one or 2 ANDA filings every quarter for the next 2-3 years going forward.
It has full impact due to the NLEM pricing policy (approximates to Rs 5.3 crore) during the quarter. The major products in domestic market fallen into in the first list of NLEM category, and had a major impact in value and volume during the quarter. Also, it almost lost Rs 7.5 crore in inventories due to the trade related issues during the quarter.
It expects the NLEM impact to be Rs 13.5 crore (Q2~5.5 crore) for FY'14. It expects NLEM impact in Q3 and Q4 may not be same as Q2. This is expected due to the introduction of new products to drive the volume and value. It has launched 15 products (9 in Chronic and 6 in Acute) during the quarter.
It expects EBIDTA margins will be back to 23-24% in the next two years time line on the back of right product mix.
The management indicated that Indian Pharmaceutical Market is not expected grow double-digit for the FY'14 on the back of trade related issues and NLEM impact.
It has Capacity constraints for the API's production and the discussions are at advanced stage to acquire API facility.
The tax rate expected to be 21% for the FY14.
It has forex cover for 62-70% of USD revenues and 80% of Euro revenues for the medium term (ranging from 15 days to 54 months).

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