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    Jubilant Pharmo

    JUBLPHARMANeutral
    Healthcare·3 Feb 2023
    Management Summary

    Jubilant Pharmova's Q3 FY23 results were characterized by strong top-line growth offset by significant margin pressure and regulatory headwinds. While the Specialty Pharma segment saw revenue gains, profitability was hampered by the absence of high-margin COVID-19 deals in the CDMO business and a temporary isotope shortage affecting Radiopharmacies. Management is aggressively pursuing a cost-optimization strategy in the Generics segment to mitigate ongoing losses and regulatory challenges at the Roorkee and Nanjangud facilities.

    Highlights

    8

    • Revenue reported at ₹1,553 crore, up 18.5% YoY, driven by Radiopharmacies and Allergy business growth.

    • Reported EBITDA stood at ₹155 crore, a decline of 22.5% YoY due to lower COVID-related deals and supply chain disruptions.

    • The company reported a Net Loss (PAT) of ₹16 crore compared to a profit of ₹51 crore in Q3 FY22.

    • Radiopharmacies business was hit by a 3-week industry-wide shortage of Technetium generators in November.

    • Generics business is undergoing a transformation with ₹150 crore in identified annual cost savings.

    • Finance costs increased to ₹51 crore (up 38% YoY) due to rising global interest rate benchmarks (SOFR).

    • Net Debt stood at ₹2,407 crore on a constant currency basis as of December 31, 2022.

    • Management maintains a target for Radiopharmacies to break even by Q4 FY24.

    Concerns

    2

    • US FDA Regulatory Status (Roorkee)

    • US FDA Observations (Nanjangud)

    What Changed3

    vs Q3 FY25

    Tone shiftGood → NeutralGuidance items6 → 5 (-1)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹1,553 Cr+18.5%YoY
    2. 02Reported EBITDA₹155 Cr-22.5%YoY
    3. 03PAT₹-16 Cr-131.4%YoY
    4. 04Finance Cost₹51 Cr+37.8%YoY
    5. 05Net Debt₹2,407 Cr+9.2%QoQ

    Segment breakdown

    • Specialty Pharma₹760 Cr49.2%
    • CDMO Sterile Injectables₹272 Cr17.6%
    • Generics₹223 Cr14.4%
    • CRDMO₹291 Cr18.8%
    Donut· Share of Revenue

    Guidance & targets

    4
    CategoryTargetPriority
    Profitability
    Radiopharmacies Break-even
    Break-even
    		High
    Other
    Annual Operating Cost Savings
    ₹100 crore
    		High
    Other
    Additional Cost Optimization
    ₹50 crore
    		Medium
    Margin
    Generics EBITDA Margin
    negative mid-single digits
    		Medium

    Risks & concerns

    7
    RiskSeverity

    US FDA Regulatory Status (Roorkee)

    Roorkee facility remains under Import Alert and OAI status; only one product has an exemption for the US market. — Both acknowledged

    high

    US FDA Observations (Nanjangud)

    The Nanjangud facility received 8 observations during a December 2022 audit; the site is currently in OAI status. — Management acknowledged

    high

    Supply Chain Vulnerability (Isotopes)

    Dependence on a small number of global nuclear reactors for Moly/Technetium leads to significant revenue volatility when reactors go offline. — Management acknowledged

    medium

    Rising Interest Rates

    1-month SOFR increased from 0.3% in March to 4.36% in December, significantly impacting finance costs. — Management acknowledged

    medium

    Areas of Evasion(3)

    • Quantifying the legal settlement in Generics
    • Specific timeline for Nanjangud regulatory resolution
    • Detailed breakdown of the ₹1,000 crore cumulative losses in Radiopharmacies

    Q&A highlights

    3

    “There was a one-time event in the industry where industry went through the shortage of Technetium generator... we had all the costs in the system, but not enough revenue to cover it for those 3 weeks.”

    Explains why the Radiopharmacy segment losses spiked back to ₹45-50 crore levels despite stable revenue.

    asked by Vinay Jain, Karma Capital

    2 min read5 chapters

    Detailed Narrative

    01

    Radiopharmacies: Isotope Shortage Masks Turnaround Progress

    The Radiopharmacies segment reported a revenue of ₹400 crore, but losses widened to approximately ₹45-50 crore during the quarter. Management attributed this to a three-week industry-wide shortage of Technetium generators in November, caused by simultaneous maintenance and breakdowns at global nuclear reactors. Despite this setback, management remains 'extremely confident' in their turnaround plan, targeting a break-even by Q4 FY24 through organic growth and operational efficiencies.

    02

    Generics: Aggressive Cost-Cutting Amid Regulatory Hurdles

    The Generics business is undergoing a large-scale transformation to pivot away from the troubled US market toward India and other international regions. The company has identified ₹150 crore in total annual cost savings, with ₹100 crore expected to be realized by March 2023 and an additional ₹50 crore by H1 FY24. While EBITDA improved sequentially to -₹36 crore, this was aided by a one-time📎 legal settlement, the value of which management declined to disclose.

    03

    CDMO Sterile Injectables: Normalizing Post-COVID

    Revenue in the CDMO Sterile Injectables business stood at ₹272 crore, showing stable performance in core products but a significant drop in EBITDA from ₹116 crore to ₹56 crore YoY. This decline is primarily due to the high base of COVID-related deals in the previous year, which have now dropped to nil. Management noted that plant shutdowns, which occur twice a year, also impacted margins during the quarter.

    04

    Regulatory Overhang: Roorkee and Nanjangud Facilities

    Regulatory challenges continue to weigh on the company, with the Roorkee plant remaining under an Import Alert and OAI status following a follow-on audit in July 2022. Furthermore, the Nanjangud API facility received 8 observations from the US FDA in December 2022. While Jubilant has submitted responses to these observations, the pending outcome prevents management from providing clear revenue or margin guidance for the API business in the near term.

    05

    Financial Headwinds: Debt and Interest Costs

    Finance costs surged to ₹51 crore in Q3 FY23, driven by the sharp rise in global interest benchmarks, specifically the 1-month SOFR which climbed to 4.36%. Net debt increased to ₹2,407 crore, up from ₹2,204 crore in the previous quarter. The company continues to invest in growth, with quarterly capital expenditure of ₹218 crore, focusing on facility upgrades and capacity expansion in the CRDMO segment.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.