Markets

Insider Trading

Hedge Funds

Retirement

Opinion

Dr. Reddy’s Laboratories Limited (NYSE:RDY) Q4 2023 Earnings Call Transcript

Dr. Reddy’s Laboratories Limited (NYSE:RDY) Q4 2023 Earnings Call Transcript May 11, 2023

Operator: Ladies and gentlemen, good day, and welcome to the Dr. Reddy’s Q4 FY ’23 Earnings Conference Call. [Operator Instructions]. I now hand the conference over to Ms. Richa Periwal. Thank you, and over to you, ma’am.

Richa Periwal: Thank you. A very good morning and good evening to all of you, and thank you for joining us today for the Dr. Reddy’s earnings conference call for the quarter and full year ended March 31, 2023. Earlier during the day, we released our results and the same are all supported on our website. This call is being recorded, and the playback and transcript shall be made available on our website so. All the discussions and analysis of this call will be based on the IFRS consolidated financial statements. The discussion today contains certain non-GAAP financial rates. For a reconciliation of GAAP to non-GAAP measures, please refer to our press release. To discuss its performance and outlook, we have the leadership team of Dr. Reddy’s comprising Mr. Gunupati Prasad, our Co-Chairman and Managing Director; Mr. Erez Israeli, our CEO; Mr. Parag Agarwal, our CFO; and the entire Investor Relations team.

Please note that today’s call is a populated material of Dr. Reddy and cannot be rebroadcasted or attributed in press or media outlet without the company’s express it to consent. Before I proceed with the call, I would like to remind everyone that the safe harbor contained in today’s release also pertains to this conference call. Now I hand over the call to Mr. Gunupati Prasad. Over to you, sir.

Gunupati Prasad: Thank you. Thank you very much. Good evening, and good morning to all of you. Welcome to the annual earnings call, best mission to you. I’m delighted to detail today along with the members of the executive team. As you may have seen in our published results, this year has been an outstanding year for the company, a year in which we set all this in our reported sales, profits and generated a healthy cash flow. And we continue to strengthen our core businesses while investing in building businesses of the future. Our sustained investments are being made to drive manufacturing excellence, strengthen our pipeline, and we build — we continue to build efficiency and productivity in our R&D as well as operations and continue to augment reaching customers by opening new markets and new channels.

Looking beyond the financial performance. During the year, we made great progress on multiple fronts and they were recognized for these achievements. More work on these are the resolution by CNBC TV18 under the Master of Risk is Care & Pharma segment. And we secured leadership from CDP, the action on climate change and supplier engagement. We also featured in the Bloomberg Gender Equality Index, the S&P Global Sustainability Yearbook, the DGSI Sustainability Index and emerging markets category and were also awarded by the economic times has been among the best organizations for women in 2023. Our largest filed dosages factory was recognized by the World Economic Forum as part of its global lighthouse network. These recognitions are an endorsement of our commitment to building a sustainable, high-performance organization focused on the needs of patients as well as for 5G.

I am excited about how far we have come in the past few years and by the opportunities we have for the future as we continue to make efforts to bring to life or credos health can’t wait. So with this, I’d like to hand over the call to Parag for taking you through the financial performance of the company.

Parag Agarwal: Thank you, Prasad. Greetings to all of you, and I hope all of you are doing well. I’m delighted to take you through our results for the quarter 4 and full year of fiscal 2023. FY ’23 has been a year of strong financial performance with the highest level of sales, record profitability and robust cash flow generation from operations. Let me provide you with a quick rundown of our Q4 and FY ’20 financials. For this section, all the amounts are translated into U.S. dollars at a convenient translation rate of INR 8.19%, which is the rate as of March 23. Consolidated revenues for the quarter stood at INR 6,297 crores, that is USD 766 million and grew by 16% on a year-on-year basis and declined by 7% on a sequential quarter basis.

Year-on-year growth was driven by growth in both generics and PSAI businesses. This was further augmented the income from divestment of a few noncore brands in India. Quarter-on-quarter decline was primarily due to sales volatility in the energy business. The revenue for the financial year 2023 stood at ease INR 4,588 crores, that is USD 2.99 billion and grew by 15%. The growth was mainly driven by new product launches, partly offset with price erosion. Consolidated gross profit margin for this quarter has been 57.3%, an increase of approximately 430 bps over previous year, a decline of 210 bps on a quarter-on-quarter basis. Year-on-year increase was driven by new product sales with higher gross margins and favorable foreign exchange. Quarter-to-quarter decline was primarily due to product mix and lower operating leverage also partly offset by divestment income.

Gross margin for the Global Generics and PSAI were 61.7% and 25.2% for the quarter. Gross margin for FY ’23 has been 56.7%, which is an increase of 360 bps over FY ’22. The increase was driven by new product sales with higher gross margin. High government incentives and favorable foreign exchange, partly offset the impact of price erosion. Gross margin showed a global generics and PSAI were at 52.1% and 16.2% for the year. The SG&A spend for the quarter is INR 1,799 crores, that is USD 219 million and increased by 15% Y-o-Y by it remained flat quarter-on-quarter. The year-on-year increase is largely on account of sales and marketing investments and adverse impact of Forex translation. The site spend for the year is INR 6,803 crores, that is 808 million and has grown by 10%.

The SG&A cost as a percentage to sales was 7.7% and is lower by 130 basis points over previous year due to better operating leverage. The R&D spend for the quarter is INR 57 crores, that is USD 65 million and is at 8.5% of sales. Our R&D efforts are focused towards building a healthy pipeline of new products across our markets, including biosimilars. The R&D spend for FY ’23 is INR 1,938 crores that is 238 million. R&D percentage to sales for the year stood at 7.9%. The EBITDA for the quarter is INR 1,631 crores, that is USD 198 million, and the EBITDA margin is 25.9%. The EBITDA for the year is INR 7,308 crores at the U.S. 89 million for the year increased at 29.7%, which is ahead of our aspirational target of 25%. Our profit before tax for the quarter stood at INR 1,326 crores, that is USD 61 million, and that for the year stood at INR 6,037 crores at USD 734 million.

Our profit before tax for the quarter grew by 434% year-on-year, and for the year, it grew by 87%. Effective tax rate has been at 27.6% for the quarter and at 25.3% for the year. The effective tax rate was lower in FY ’23 largely due to changes in the company’s [indiscernible] mix of earnings. We expect our normal ETR to be in the range of 24% to 25%. Profit after tax for the quarter stood at INR 929 crores, that is USD 117 million, and that for the year stood at INR 4,507 crores, that is USD 548 million. Reported EPS for the quarter is INR 7.62 and that for the year is INR 27.85. Operating working capital reduced by INR 54 crores, which is USD 44 million against that on December 31, 2022, mainly supported by an improvement in receivables. Our capital investment stood at INR 258 crores, which is €31 million in this quarter and INR 1,132 crores, which is USD 138 million during the year.

The free cash flow generated during this quarter was at INR 1,596 crores, which is USD 194 million. The free cash flow generated during this year was at INR 409 crores, which is USD 488 million. Consequently, we now have a net surplus cash of INR 5,046 crores, that is USD 640 million as of March 31, 2023. Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are approximately USD 774 million, largely held around the reach of INR 32.4 to INR 84.5 to dollar 730 million at the rate of INR 1.045 to the ruble and USD 4.2 million at a rate of INR 57.8 to USD 7 maturing in the next 12 months. With this, I now request Erez to take you through the key business highlights.

Erez Israeli: Thank you, Parag. Good morning and good evening to everyone. As Prasad highlighted, we have delivered strong financial performance in FY ’23. We closed the financial year with double-digit top line and bottom line growth with EBITDA and ROC margin exceeding the 25% level. This impressive performance was reflected in our cash flow, and we continue to have a strong balance sheet. We progress well on our strategic priorities, and we are able to invest in our organic capabilities and business development opportunities to thrive and deliver on our purpose over the long term. Let me take you to some of the key highlights of you. One, we witnessed underlying growth momentum in FY ’20 across all businesses, adjusted for COVID products contribution during this year.

Two, revenue in North America generics and branded markets of B&M crossed the $1 billion mark for the second consecutive year. Three, we divested certain noncore brands in India to focus on strengthening the core. Our EBITDA is at 30% and ROC our ROCE is at 35%. We generated a strong free cash flow leading to a net cash surplus of $640 million. We also see positive momentum on BD/M&A with the acquisition of [indiscernible] brand into India, main pharma U.S. generic prescription product portfolio and ION’s branded and generic injectable products in the United States. Significant progress also made in our biosimilar businesses. We see a launch of biosimilar still event, which is backfill esteem by Fresenius cab in the U.S. We completed and we saw the completion of clinical studies of rituximab biosimilars and we already filed in U.S., Europe and the U.K. MHRA.

We saw the completion of Phase I study of biosimilar tocilizumab and global Phase III study was initiated. Recently, we received approvals of 3 products in China, namely Sevelamer, Slidenafil and Carboprost and our partners [indiscernible] tablets. We are also progressing well in our digitalization as well as our ESG journey. Our diversified global presence, capability and strong balance sheet negative partner of choice. We continue to work towards strengthening our position as a partner of choice including in [indiscernible]. From horizon 2 perspective, we signed some strategic license deal in ES2, including the below — with cardiac care for the wearable for [indiscernible] treatment with [indiscernible] for the wearable in management of migraine with the New Zealand-based WCTL to bring the [indiscernible] cart assets for clinical trials in India.

We do see Bioscience to bring Tocilizumab tibia and other markets. We are investing in developing trials of this DTX, biosimilar assets in keeping with our stated horizon strategy. We see them as the future bodies. Now let me take you through the key business highlights for the Q4 and FY ’20. Please note that all the reference to the numbers in this section are in respective local currencies. Our North America Generics business recorded sales of $312 million for the quarter with a strong growth of 18% year-over-year and 7% decline on a sequential basis. On a full year basis, we recorded sales of $1.68 billion with a growth of 26% over the previous year. This growth is largely led by new product launches such as lenalidomide, sorafenib tablets and Tobramycin and growing market share in certain existing products, which more than offset increased by the [indiscernible].

We launched 16 products during the quarter and overall, 25 products during the year. We expect the launch momentum to further improve in IFRS ’24. Our Europe business recorded sales of $56 million this quarter with a year-over-year growth of 7% and sequential quarter growth of 9%. On a full year basis, the sales of €210 million and has grown by 9%, driven by base business volume and new product launches. We launched 5 new products during the quarter and certified for the full year in Europe across all markets. We expect this transformation to continue in FY 1. Our emerging markets business recorded sales of $1,114 with a year-over-year decline of 7% and a sequential quarter decline of 15%. On a full year basis, emerging market sales has been roughly flat at INR 4,550 crores.

However, the sales have grown 13% adjusted for the COVID related products and divestment income in FY ’22. We launched 10 new products during the quarter and 94 new products during the year across various countries of the emerging markets. Within the EM segment, the Russia business in Quito declined by 34% on a year-to-year basis and 17% on a Q-on-Q basis in constant currency. In FY ’23, Russia business declined by 9% in constant currency. The decline is attributed to divestment of noncore brand during the previous year. During the year, there has been normalization in the channel customer stocking level after the price FY ’22. We have been navigating the evolving geopolitical uncertainties and a manage the Google to currency fluctuation with effective GI.

Our India business recorded Q4 sales of 1,293 tones with a year-over growth of 32% and a sequential increase of 14%. On a full year basis, our sales were INR 4,893 with a growth of 17%. Excluding the benefit of the divestment income and adjusted for COVID-19-related products, year-over-year sales growth for the quarter has been 11% and for the full year has been 13%. As per IQ the report, we are ranked #10 [indiscernible]. India remains our priority market, and we are committed to continue to grow this business at a halt rate. Our PCI business recorded sales of $95 million with an innovative decline of 4% and flat sequentially. On a full year basis, the sales were $362 million with a decline of 12%. The decline was primarily due to high base effect of COVID-related products.

We expect this business to grow billing [indiscernible]. Our R&D efforts are focused on developing value accretive products, including several generic injectables and biosimilars, where there is a patient need. We have done 195 global generic filing, including 12 ANDAs filed in the U.S. and 130 [indiscernible] file filing globally, including 12 drugmaker side in the U.S. During FY ’23 during FY ’20, we are on track to accelerate on this in FRR24. We are progressing well in development of our similar products and working on some [indiscernible] and Horizon 2 initiatives. Our strong balance sheet provides us financial flexibility to support future growth, invest in business development opportunities, and we will continue to maintain a disciplined approach to cash management and acquisitions.

We continue to focus on optimizing workplace efficiency and productivity. We remain focused on strengthening our core generics and API business and delivering more and more strong foundation. We are building a pipeline of products to meet an evolving need of patients and health care professionals to investment in internal R&D as well as strategic acquisitions. With this, I would like to open the floor for questions and answers.

Q&A Session

Follow Dr Reddys Laboratories Ltd (NYSE:RDY)

Operator: [Operator Instructions]. The first question is from the line of Balaji Prasad from Barclays.

Operator: The next question is from the line of Surya Patra from PhilipCapital.

Operator: The next question is from the line of Damayanti Kerai from HSBC.

Operator: We have the next question from the line of Neha Manpuria from Bank of America.

Operator: The next question is from the line of Ankush Mahajan from Axis Securities.

Operator: The next question is from the line of Kunal Dhamesha from Macquarie.

Operator: The next question is from the line of Madhav Marda from FI Industries.

Operator: The next question is from the line of Cyndrella Thomas Carvalho from JM Financial.

Operator: The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Operator: The next question is from the line of Ashish Chopra from IIFL Asset Management.

Operator: The next question is from the line of Nitin Agarwal from DAM Capital Advisors.

Operator: The next question is from the line of Prakash Agarwal from Axis Capital.

Operator: We will take that as a last question for today. Ladies and gentlemen, I would now like to hand the conference over to Ms. Richa Periwal for closing comments. Over to you, ma’am.

Richa Periwal: Thank you. Thank you, everyone, for joining us today for the earnings call. For any further queries, please reach out to the Investor Relations team. Thank you. Have a great day.

Operator: Thank you. On behalf of Dr. Reddy’s Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Follow Dr Reddys Laboratories Ltd (NYSE:RDY)

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

The whispers are turning into roars.

Artificial intelligence isn’t science fiction anymore.

It’s the revolution reshaping every industry on the planet.

From driverless cars to medical breakthroughs, AI is on the cusp of a global explosion, and savvy investors stand to reap the rewards.

Here’s why this is the prime moment to jump on the AI bandwagon:

Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.

Imagine every sector, from healthcare to finance, infused with superhuman intelligence.

We’re talking disease prediction, hyper-personalized marketing, and automated logistics that streamline everything.

This isn’t a maybe – it’s an inevitability.

Early investors will be the ones positioned to ride the wave of this technological tsunami.

Ground Floor Opportunity: Remember the early days of the internet?

Those who saw the potential of tech giants back then are sitting pretty today.

AI is at a similar inflection point.

We’re not talking about established players – we’re talking about nimble startups with groundbreaking ideas and the potential to become the next Google or Amazon.

This is your chance to get in before the rockets take off!

Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.

From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.

This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.

By investing in AI, you’re essentially backing the future.

The future is powered by artificial intelligence, and the time to invest is NOW.

Don’t be a spectator in this technological revolution.

Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.

This isn’t just about making money – it’s about being part of the future.

So, buckle up and get ready for the ride of your investment life!

Act Now and Unlock a Potential 10,000% Return: This AI Stock is a Diamond in the Rough (But Our Help is Key!)

The AI revolution is upon us, and savvy investors stand to make a fortune.

But with so many choices, how do you find the hidden gem – the company poised for explosive growth?

That’s where our expertise comes in.

We’ve got the answer, but there’s a twist…

Imagine an AI company so groundbreaking, so far ahead of the curve, that even if its stock price quadrupled today, it would still be considered ridiculously cheap.

That’s the potential you’re looking at. This isn’t just about a decent return – we’re talking about a 10,000% gain over the next decade!

Our research team has identified a hidden gem – an AI company with cutting-edge technology, massive potential, and a current stock price that screams opportunity.

This company boasts the most advanced technology in the AI sector, putting them leagues ahead of competitors.

It’s like having a race car on a go-kart track.

They have a strong possibility of cornering entire markets, becoming the undisputed leader in their field.

Here’s the catch (it’s a good one): To uncover this sleeping giant, you’ll need our exclusive intel.

We want to make sure none of our valued readers miss out on this groundbreaking opportunity!

That’s why we’re slashing the price of our Premium Readership Newsletter by a whopping 70%.

For a ridiculously low price of just $29, you can unlock a year’s worth of in-depth investment research and exclusive insights – that’s less than a single restaurant meal!

Here’s why this is a deal you can’t afford to pass up:

• Access to our Detailed Report on this Game-Changing AI Stock: Our in-depth report dives deep into our #1 AI stock’s groundbreaking technology and massive growth potential.

• 11 New Issues of Our Premium Readership Newsletter: You will also receive 11 new issues and at least one new stock pick per month from our monthly newsletter’s portfolio over the next 12 months. These stocks are handpicked by our research director, Dr. Inan Dogan.

• One free upcoming issue of our 70+ page Quarterly Newsletter: A value of $149

• Bonus Reports: Premium access to members-only fund manager video interviews

• Ad-Free Browsing: Enjoy a year of investment research free from distracting banner and pop-up ads, allowing you to focus on uncovering the next big opportunity.

• 30-Day Money-Back Guarantee:  If you’re not absolutely satisfied with our service, we’ll provide a full refund within 30 days, no questions asked.

 

Space is Limited! Only 1000 spots are available for this exclusive offer. Don’t let this chance slip away – subscribe to our Premium Readership Newsletter today and unlock the potential for a life-changing investment.

Here’s what to do next:

1. Head over to our website and subscribe to our Premium Readership Newsletter for just $29.

2. Enjoy a year of ad-free browsing, exclusive access to our in-depth report on the revolutionary AI company, and the upcoming issues of our Premium Readership Newsletter over the next 12 months.

3. Sit back, relax, and know that you’re backed by our ironclad 30-day money-back guarantee.

Don’t miss out on this incredible opportunity! Subscribe now and take control of your AI investment future!


No worries about auto-renewals! Our 30-Day Money-Back Guarantee applies whether you’re joining us for the first time or renewing your subscription a year later!

A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…