Fredun Pharma Q1 FY27 earnings call

Fredun Pharma reported a robust Q1 FY27, with stand-alone total income surging 90.44% year-on-year to INR228.25 crores. This strong top-line growth translated into a 92.90% increase in EBITDA to INR32.78 crores, and a 94.63% rise in net profit to INR13.17 crores. The company's profitability also saw an uplift, with EBITDA margin expanding by 18 basis points to 14.36% and net profit margin improving by 12 basis points to 5.77%.

Management outlined an ambitious growth trajectory, projecting a blended growth rate of 30-35% for the next three years. This growth is expected to be fueled by new age brands, which are currently expanding at 35-45% year-on-year, and the vintage business, growing at 15-20% year-on-year. The Fredun GX line, currently a INR100-110 crore business, is specifically targeted for 25-35% year-on-year growth over the next five years, leveraging its presence in 19 states and deeper penetration into Tier 2 and 4 cities.

Fredun Pharma is making significant strides in the pet care segment, with its Wagr.in platform evolving into a comprehensive pet parenting hub. Beyond e-commerce, the platform integrates services like diagnostics, a network of breeders, trainers, groomers, and doctors, and is also tying up with pet blood collection services. The company aims for its pet care business to achieve INR100 crore revenue within 3-3.5 years from launch or plant building, with overall pet care growth projected at 40-50% for the next 3-4 years, supported by the launch of cat biscuits in the next 6-7 months.

To support its aggressive growth plans, Fredun Pharma has earmarked a CapEx of INR30-40 crores for the current financial year (FY27) and a similar amount for FY28. Over the next two years, the annual CapEx is expected to be in the range of INR35-45 crores. This investment is strategically aimed at making the company one of the largest manufacturing units at a single location by the end of December 2028 or early 2029, alongside continuous upgrades to meet cGMP protocols.

The company reported a working capital of INR170-175 crores against a run rate of INR850 crores, with nearly 50% of this held as cash on hand, indicating a comfortable liquidity position. Interest costs are gradually reducing due to improved cash flows and a recent credit rating upgrade from BBB to BBB+. Furthermore, inventory days have been rationalized, decreasing by almost 50% in the last two years, with a target to further reduce them to around 120 days from the current 140-135 days within the next four quarters.

For FY27, Fredun Pharma has an internal revenue target of around INR800 crores, which management expects to surpass, though they refrained from commenting on a more ambitious INR1,000 crore target. Regarding profitability, while no immediate EBIT margin target was provided, management indicated that the company should be 'near 12-13%' within the next 12 quarters. This improvement is expected to be driven by a favorable product mix, with segments like Dermaceutics boasting 70-75% gross margins and Pet Care at 45-55%.