Morepen Labs.

Morepen Labs reported an 'outstanding performance' in FY24, with annual revenue growing 20% to ₹1,704 crores from ₹1,424 crores in the previous year. This robust top-line growth translated into significant profitability improvements, as EBITDA more than doubled by 101% to ₹173 crores, and Profit After Tax (PAT) surged 150% to ₹97 crores from ₹38 crores. The company also achieved a 16.5% revenue growth in Q4 FY24 and reported a healthy cash generation of ₹168 crores, nearly double the ₹83 crores from the prior year, while maintaining a debt-free status with ₹35-44 crores in fixed deposits.

The Medical Devices segment is highlighted as Morepen's 'fastest growing business,' with its annual revenue increasing 35% to ₹443 crores in FY24 from ₹327 crores. This segment now contributes over 26% of total revenue. Key products, Gluco Monitors and BP Monitors, hold 19% and 18% market share respectively. The company has installed 1.16 crore Gluco meters and sold 36 crore Strips last year, with an expectation to sell 40 crore Strips this year. The EBITDA margin for Medical Devices improved significantly to 12% in FY24 from 8% last year, with management targeting 18-19% in the next five years through backward integration and capacity expansion.

The API business, described as the company's 'cash cow,' demonstrated consistent growth, with annual revenue increasing 14% to ₹940 crores in FY24 from ₹823 crores. Exports account for 68% of API revenue, reaching over 80 countries and serving more than 500 customers. Morepen is a market leader in 6 API products, including Loratadine, Desloratadine, and Montelukast, which collectively contribute 90% of API revenue. The company increased its reactor capacity from 300 KL to 400 KL and saw a 40% increase in volume sold to 432 metric tons in FY24. The EBITDA margin for API business improved to 18% from 16% last year.

Morepen is strategically focused on backward integration, with plans to initiate in-house production of Glucometer Strips, currently imported from Korea, to enhance supply chain control. The company has also expanded its manufacturing capacities for both medical devices and APIs. Management indicated that existing gross block can support API revenue up to ₹1,150 crores (an additional ₹150-200 crores) with minor additions, and Formulation revenue can reach ₹300 crores (a 3x increase from current ₹100 crores) with existing CAPEX, expecting this growth in the next two years.

The Formulation and OTC business, while showing a 10% annual revenue growth, recorded an EBITDA loss of ₹19.5 crores in FY24, with a Q4 loss of ₹4 crores. Management acknowledged this segment as a drag on overall profitability, attributing it to high salary costs from recent capacity additions and a relatively small distribution business. Efforts are underway to achieve breakeven in FY25 by leveraging high-speed machines for higher volumes, including increased supplies to the Jan Aushadhi government scheme, which has tripled this year. However, management clarified that this segment is not the core growth story for the company.

Morepen's future growth in Medical Devices is driven by expanding its retail network from 125,000 to a target of 300,000 retailers in the next five years, with a specific focus on increasing sales in South India. The company also aims for direct exports under its own label and private labels to markets like the US and Europe. In terms of innovation, Morepen is investing in R&D across three labs, including work on Continuous Glucose Monitoring (CGM) patch technology, with an aspirational target of developing a more affordable solution (₹1,000/patch monthly cost) within 2-3 years, compared to current market offerings like Abbott's ₹14,000 for a 14-day patch.