Hikal Limited — Q3 FY25 earnings call

Call held 4 Feb 2025

Management summary

Hikal reported a strong Q3 FY25 with revenue of INR448 crores and EBITDA growth of 11% year-on-year, driven by improved product mix and operating leverage. The Pharma business showed significant EBIT growth, while the Crop Protection sector is beginning to stabilize. The company is focusing on NCEs and CDMO opportunities across its segments, with a healthy pipeline and strategic initiatives like Project Pinnacle expected to drive future growth and margin expansion.

Highlights

  • Q3 FY25 Revenue: INR448 crores.

  • Q3 FY25 EBITDA: INR72 crores, up 11% YoY.

  • 9M FY25 Revenue: INR1,307 crores, up 3% YoY.

  • 9M FY25 EBITDA: INR205 crores, up 18% YoY.

  • Q3 FY25 Pharma Revenue: INR293 crores, with EBIT of INR33 crores (450 bps increase YoY).

  • Q3 FY25 Crop Protection Revenue: INR154 crores, with EBIT of INR14 crores (9% EBIT margin).

  • Operating cash flow (9-month basis): INR102 crores.

  • Interim dividend recommended: INR0.6 per share (30% of face value).

Key financials

2 periods

Headline

  • Revenue
    ₹448 Cr
  • EBITDA
    ₹72 Cr
    YoY +11%
  • Gross Debt
    ₹731 Cr

9M

  • Revenue
    ₹1,307 Cr
    YoY +3%
  • EBITDA
    ₹205 Cr
    YoY +18%
  • Operating Cash Flow
    ₹102 Cr

What they filed

Q1 FY27: revenue up 5.9%, net profit up 67.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue453 448 552 380 319 −30%494 +10%519 −6%403 +6%
EBITDA75 72 123 25 7 −90%83 +15%105 −15%37 +47%
Net profit18 17 50 -22 -35 −291%-6 −134%14 −71%-7 +67%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue (Q3 FY25)
₹447 Cr Total
  • Pharma ₹293 Cr 65.5%
  • Crop Protection ₹154 Cr 34.5%

Guidance & targets

Capacity

  • Ramp-up from new multipurpose facility at Panoli Capacity · next 2-3 years · Medium confidence over the next 2 to 3 years
    We expect the ramp-up from this facility over the next 2 to 3 years.

    — Sameer Hiremath

Profitability

  • Full year results Profitability · FY25 · Medium confidence positive results on a full year basis, led by stronger profit and margin growth
    As we approach the end of this financial year, we expect to deliver positive results on a full year basis, led by stronger profit and margin growth.

    — Sameer Hiremath

  • Animal Health contribution margins Profitability · High confidence 45% plus
    So, the margins will be on the contribution side, I would estimate the margins to be 45% plus, right?

    — Anish Swadi

  • Animal Health NCE/CDMO gross margins Profitability · High confidence in excess of 50%
    Yes, certainly. I mean, like I said, is that the NCE type or the CDMO type products will be in excess of 50% in terms of gross margins, right?

    — Anish Swadi

  • EBITDA margins Profitability · High confidence cross the 20% number
    And margins will cross then margins will cross the 20% number. I mean, our aim is to get well in excess of 20%.

    — Sameer Hiremath

Product Launch

  • New products from development pipeline Product Launch · Annually · High confidence three to four products annually
    Currently, our product development pipeline includes eight to nine products, and we're anticipating to launch three to four products annually.

    — Sameer Hiremath

Commercialization

  • CDMO commercial supply Commercialization · CY26-CY27 · High confidence initiated by the end of calendar year '26, beginning '27
    Commercial supply will be initiated by the end of calendar year '26, beginning '27.

    — Sameer Hiremath

  • NCE molecules from Phase III trials Commercialization · FY26-FY27 · High confidence launch towards the end of financial year FY '26, very early '27
    Out of that, two products are very close to launch, which we expected to be launched in -- towards the end of financial year FY '26. And the others will get launched if everything goes well, in FY '27 and beyond.

    — Sameer Hiremath

Revenue

  • Food ingredients projects peak revenue Revenue · next 2-3 years · Medium confidence peak revenue in the next 2 to 3 years
    Moreover, our food ingredients projects is progressing well, and we expect it to achieve peak revenue in the next 2 to 3 years.

    — Sameer Hiremath

  • Animal Health segment business Revenue · next 5 years · High confidence in excess of INR400-plus crores
    I think over the next 5 years, we'd like this to become an independent division by itself, stand-alone, just like we have Pharmaceuticals and we have the Crop Protection division. So, we really see a significant amount of growth in excess of INR400-plus crores of business over the next 5 years.

    — Anish Swadi

  • NCE CDMO peak potential per molecule Revenue · 3-4 years out (after launch) · Medium confidence INR50 crores in the worst case to maybe a few hundred crores per molecule in the best case
    I think INR500 crores is a bit too high. It's very stretched. I mean we all aspire to get one or two those. But currently, with what we see, it could be INR50 crores in the worst case to maybe a few hundred crores per molecule in the best case, in that range.

    — Sameer Hiremath

  • Combined NCE CDMO revenue Revenue · Medium confidence INR400 crores, INR500 crores every year going forward
    So, a combination of that could generate INR400 crores, INR500 crores every year going forward.

    — Sameer Hiremath

Validation

  • Animal Health portfolio validation Validation · next 2 quarters · High confidence complete in the upcoming 2 quarters
    We expect to complete the validation of the portfolio in the upcoming 2 quarters, which will assist us in securing the product registration in various countries and ultimately enable the launch of these products across several global markets.

    — Anish Swadi

Revenue Growth

  • Company level CAGR Revenue Growth · next 3-5 years · High confidence high teens per year-on-year CAGR
    I think we are anticipating a growth in the next 3 to 5 years of high teens per year-on-year CAGR if you were to project ourselves out and we were sitting together here in FY '28, 3-4 years from now, and we have to review where the business was in FY '24 and where we are stepwise, we'll get there.

    — Sameer Hiremath

  • Agrochemical business growth drivers Revenue Growth · FY27 onwards · Medium confidence drive growth FY '27 onwards
    And we have several, as Vimal mentioned, we have more than 8 active projects which are under filing or under launch in the next 2 to 3 years. And these will drive growth FY '27 onwards, I would say.

    — Sameer Hiremath

Capex

  • Current year capex Capex · FY25 · High confidence INR140 crores to INR150 crores
    Absolutely. We are sticking to what we have said earlier. It will be INR140 crores to INR150 crores.

    — Kuldeep Jain

  • Annual capex Capex · each year (FY26 onwards) · High confidence almost INR150 crores to INR200 crores each year
    As you mentioned earlier, typically, we have a plan of almost INR150 crores to INR200 crores each year.

    — Kuldeep Jain

  • Replacement capex percentage Capex · High confidence 30% to 40%
    See, 30% to 40% will be replacement capex. The balance will be the debottleneck growth capex.

    — Kuldeep Jain

Risks & concerns

  • Intense pricing pressure and dumping from Chinese competitors

    medium

    Although China Plus One is expected to strengthen, intense pricing pressure and dumping continues from Chinese competitors for generics and commodity products.

    Management acknowledged

  • Short-term pain in crop business

    medium

    Management indicated 'a few more quarters of pain left for the crop business' before it returns to a growth phase.

    Management acknowledged

  • Volatility and uncertainty regarding US tariffs on Chinese chemicals

    medium

    The situation regarding 10% tariffs on chemical companies in China is volatile, and its impact is unknown, potentially being a negotiating tactic.

    Management acknowledged

Q&A highlights

3 direct
CDMO NCE pipeline and commercialization timeline Direct
we have currently about, 13 to 14 products in the CDMO under various pipelines, and most of them are between Phase II and Phase III. Phase IV is already getting into launch mode. Out of that, two products are very close to launch, which we expected to be launched in -- towards the end of financial year FY '26. And the others will get launched if everything goes well, in FY '27 and beyond.

Provides specific numbers for the CDMO pipeline and clear timelines for commercialization of NCEs, which are key growth drivers.

Asked by Dhaval Shah

Project Pinnacle's impact on margins and future upside Direct
Absolutely. I mean it's not only increasing the revenue, but increasing the margin profile, selection of products, which are the areas of focus in terms of business that we need to win, what are the growth drivers, what is the ESG goals. So, it's a whole round strategy exercise. It wasn't just focusing only on the bottom line, right?

Clarifies that Project Pinnacle is a holistic strategy for growth, margin improvement, and sustainability, not just cost-cutting, indicating long-term strategic direction.

Asked by Rohit Nagraj

Peak revenue potential of NCE CDMO molecules and Hikal's differentiation Direct
I think INR500 crores is a bit too high. It's very stretched. I mean we all aspire to get one or two those. But currently, with what we see, it could be INR50 crores in the worst case to maybe a few hundred crores per molecule in the best case, in that range. But we have multiple products that we will launch... So, a combination of that could generate INR400 crores, INR500 crores every year going forward.

Provides a realistic range for the revenue potential of individual NCE molecules and the combined potential from multiple launches, giving investors a sense of future scale.

Asked by Sajal Kapoor

2 min read 6 chapters

Detailed narrative

Q3 & 9MFY25 Financial Performance Overview

Hikal reported a robust Q3 FY25 with revenue reaching INR448 crores and EBITDA growing 11% year-on-year to INR72 crores. For the nine-month period (9MFY25), revenue stood at INR1,307 crores, marking a 3% year-on-year growth, while EBITDA increased by 18% to INR205 crores. The company generated an operating cash flow of INR102 crores on a 9-month basis and recommended an interim dividend of INR0.6 per share.

Pharmaceutical Business Momentum

The Pharma business demonstrated strong performance in Q3 FY25, reporting revenues of INR293 crores and an EBIT of INR33 crores, a significant 450 basis points increase year-on-year. This growth was attributed to an improved product mix and operating leverage. The company's CDMO pipeline currently includes 13-14 products, with two NCEs expected to launch towards the end of FY26 or early FY27, and commercial supply for several NCE molecules anticipated by end of calendar year '26.

Crop Protection Division: Stabilization and Strategy

The Crop Protection division recorded revenues of INR154 crores in Q3 FY25, with an EBIT of INR14 crores and an EBIT margin of 9%. While the sector faces ongoing pricing pressure from Chinese competitors, management noted signs of stabilization and a rise in domestic demand. Hikal's strategy involves shifting towards new chemical entities (NCEs) and new technologies, with over 8 active projects under filing or launch expected to drive growth from FY27 onwards.

Animal Health Business: New Growth Vector

Hikal's Animal Health project, under a long-term agreement with a global innovator, is progressing well, with validation of seven products already completed and the balance expected in the next few months. The company anticipates this segment to become an independent division, projecting over INR400 crores in business over the next 5 years. Contribution margins for this segment are expected to be 45% plus, with NCE/CDMO type products potentially exceeding 50% gross margins.

CDMO Pipeline and Future Commercialization

The CDMO business is a key focus, with several projects advancing towards validation and commercialization. Beyond the two NCEs nearing launch by FY26/early FY27, the company aims to launch 3-4 new products annually from its 8-9 product development pipeline. Management estimates that a combination of multiple NCE CDMO product launches could generate INR400-500 crores in revenue annually going forward, with individual molecules potentially contributing INR50 to a few hundred crores at peak.

Strategic Initiatives and Capital Allocation

Hikal's 'Project Pinnacle' strategy, launched two years ago, is focused on identifying future opportunities, improving operational efficiency, and strengthening its market position. The company is committed to R&D, investing 4.5% to 5% of its revenue, and aims for a high-teens year-on-year CAGR over the next 3-5 years, with EBITDA margins targeted to cross 20%. Capex for FY25 is guided at INR140-150 crores, with annual capex of INR150-200 crores planned for subsequent years, 30-40% of which will be for replacement and the rest for debottlenecking and growth.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Healthcare earnings calls