Brief Introduction
Gufic Biosciences Limited is engaged in the manufacture of pharmaceuticals, medicinal chemicals, and botanical products. Gufic was in the business of manufacturing and marketing injectable products since the late 1970s. The group had earlier exited its API and formulations manufacturing division by selling its six major brands such as Mox (Amoxycillin) Injection, Zole (Miconazole Nitrate), etc. to Ranbaxy in 1997. The promoters then re-entered the pharmaceutical formulations segment through the incorporation of Gufic Biosciences Limited in 2000. Gufic Biosciences has been manufacturing lyophilized injectables (their main business) for 40+ years.
Q3 FY23 results
Financial results & highlights
Detailed Results:
- The company had a poor quarter with revenue and profits increasing by 3% and negative 3% on a YoY basis respectively.
- The PAT margin for the current Q3 is 11.4%, Q3 of last year was 10.1% while the EBITDA margin for the current Q3 is 19.1% Vs INR19.7% YoY.
Investor Conference Call Highlights
- With regards to new capex in Indore: focused all its energies on ensuring that it is on track with commercializing its Indore facility,
- The company launched Sparsh – a division, where it completed its primary and secondary research on the field which involves reaching out to nearly 5000 hospitals where it maps the potential for around 100 and 150 molecules.
- The company foresees the annual market of its new molecules to be around INR500 to INR600 crores and is targeting a 20% to 25% market share within the next year.
- The company filed Amsterdam has started the process for registering dermal fillers & it received three-product approvals, one each from Colombia, Kenya, and the Philippines.
- The revenues have been lower YoY owing to the higher base of the previous year because of one-time covid led revenues.
- In the new molecules which were launched in December, the company will target 5 states in the initial phase, & is targeting a revenue rate of 100 Crs from FY24-25 onwards.
- The margins have improved from 13% to 19-20% in the past 5 years owing to operational leverage.
- The company’s primary growth levers for 15-20% growth are lower penetration in the international market, followed by organic growth in the domestic market, & Indore facility kicking in which will ensure the total capacity of BofI becomes almost 2.5x.
- The management expects revenue of the dual chamber back should start capturing from Q1 2024 post rationalization of MRP prices.
- The company is eyeing its dydrogesterone tablets brand to become an INR 10 Crs brand within 2 years.
- The Zarbot product is facing a tough time growing, unlike Tanex which has already become 4X YoY.
- The company has passed 5 batches from Alicia to Gynecologists.
- The CMO biz is seeing margin compression primarily due to inventory issues.
- The working capital cycle has elongated priorly due to increased inventory & credit period in the CMO biz coupled with an increased channel in exports leading to higher investments in working capital.
- The management states that the entire unit 1 of the Navsari factory, which is a legacy factory will be converted into infertility products manufacturing site.
- India’s contribution to formulations stands at 75% & is expected to reduce up to 60% due to higher growth of exports.
Analyst’s View
Gufic biosciences is one of the most formidable pharma stocks owing to its presence in niche spaces like Ferticare, Botulinum Toxin range of products, immuno-oncology as well as CMO. The company reported a mediocre quarter owing to the higher base of the previous year because of covid related biz. It remains to be seen how the company will scale up its new Indore unit, and deal with increased working capital requirements, inventory destocking & macroeconomic headwinds. However, given its strong historical operating performance & promoter’s experience, it remains an interesting small-cap stock to keep track of.