- Operations were mostly unaffected by COVID. They have observed lengthening of supply chains, so they are stocking up on raw materials for Q4.
- Revenue growth was 10% YoY. EBITDA growth was 12% indicating operating leverage. Key growth drivers for revenue during the quarter were discovery services and dedicated centers. Development and manufacturing services delivered more sustained performances.
- EBITDA margin was 31.7% compared to 30.1% last year – increase of 160bps. EBITDA margins were affected by 2 opposing forces. Increase in RM and power costs put pressure on margins by 180bps, it was offset by 340bps margin improvement due to better cost performance in other lines and forex gains.
- Q4 is usually their best quarter and they are expecting a solid performance this year as well. The company has revised their revenue guidance from mid-teens to high-teens growth.
- Key highlight this quarter – Long term contract with Amgen was renewed for 5 years. Scope of the contract extension includes integrated drug discovery and development solutions. Will be building a dedicated laboratory for scaling API as part of the contract extension.
- Expecting more contribution from Remdesivir this quarter due to the increase in Omicron cases.
- Planned capex for the year was ₹750-900 Cr including ₹250 Cr rolled over from last year. Invested about 352 Cr this year and already committed another ₹300 Cr for execution. So total capex will be around ₹500-600 Cr this year and the remaining will spill over to next year.
- Capex split – Around half is in discovery services, 1/3rd is in development manufacturing. Remaining 10-20% is in other things like digitization across the whole company.
- Will be inaugurating Phase 3 of Hyderabad facility in preparation for future growth. Will be able to accommodate additional 250 scientists for discovery service. Capex for this facility is already built into the plan.
- The Mangalore facility is proceeding as planned and will receive USFDA approval within the next 2 years. Filing by a customer from the Mangalore facility will trigger an inspection by USFDA. Currently are working on a molecule that may be commercialized from Mangalore. The facility is in a SEZ. So they will receive tax benefits. 5 year 100% tax holiday + 5 years 50% tax holiday.