Hikal : Results Presentation FY23Q1

Results Presentation - Q1 FY23

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© Hikal Limited

Executive Chairman's Message

Jai Hiremath

"We had a challenging quarter where we witnessed significant headwinds in both our businesses. Our Pharmaceutical business witnessed a de-growth of 18% and revenue stood at Rs. 224 Crores in Q1 FY23, predominantly due to channel inventory correction at customers' end. Additionally, this quarter we experienced margin pressure on account of higher input costs which have started easing out and a positive impact on margins is expected to be visible in the coming quarters. We expect the demand for our own products business to improve in the coming quarters. We continued to receive several new inquiries from global innovator companies for the partnerships in the CDMO business segment and successfully secured few projects from global innovators, which have a potential to turn into in significant incremental revenues in the coming years. We have a healthy pipeline of new products and are confident of capitalizing on our product mix going forward.

In the Crop Protection business, revenue stood at Rs 154 Crores in Q1 FY23. Due to disruption in operations of our Taloja plant we lost production capacity for a significant part of the quarter. However, we utilized the time effectively by undertaking our annual preventive maintenance. Our plant is now fully operational, and our operations team is committed to make up the production loss to the best extent, over the next three quarters. We are on track for building our new multipurpose plant for launching new products, which is expected to come on stream by the end of this financial year. On the CDMO front, we continue to receive numerous new inquiries from both existing and new customers. We are working on several new products for global innovator companies. With the demand remaining robust in the market, we are very positive towards our growth story in the Crop Protection business.

With the ongoing Russia Ukraine war, supply chain continues to be a concern for the overall industry. We continued to see a rise in the input costs of raw materials, solvents, utilities and fuel which has affected our margins. Our focus is to passthrough these increases in the input costs to our customers and optimize the fuel mix. We expect the prices of some of our key raw materials to soften in the upcoming months, which will improve our overall margins and profitability. We continue our efforts on cost improvement projects as well as to improve operational efficiency within our business excellence program to partly absorb the higher input costs. We will continue developing alternate domestic suppliers to mitigate the supply chain disruptions prevailing in present market on account of global geopolitical situation.

Considering the uncertainties prevalent in macro environment, most global companies are looking for supply chain diversification (China- plus-one strategy). We are witnessing numerous inquiries from on potential collaborations, and we are well positioned to capture the influx of opportunities. In addition, we are also seeing significant traction in our emerging Animal Health business with enhanced inquiries. As part of our 10-yearmulti-product project with a global innovator, process development of several active ingredients is on-track, and a dedicated asset for Animal health business is under way which is expected to be commissioned by end of FY23.

Our transformation journey, "Pinnacle Program" is witnessing good momentum across both businesses. We have taken various initiatives across the company to make Hikal to go from 'Good to Great'. This will help reach our bold aspiration of driving profitable as well as sustainable growth.

We are optimistic about our growth story. We expect a step wise recovery in the upcoming three quarters with tailwinds supporting us and are confident of coming back to our profitable growth trajectory by end of FY23."

© Hikal Limited

Quarterly Financials Highlights

Q1 was a challenging quarter for both Pharmaceutical and Crop Protection businesses, however a step-wise recovery is expected in next three quarters

Revenue - Q1 FY23	EBITDA - Q1 FY23	EBITDA Margin - Q1 FY23
Rs. 379 Crore		Rs. 23 Crore		6.0%
YoY	QoQ	YoY	QoQ	YoY	QoQ
-17%	-25%	-76%	-63%	-1500 bps	-620 bps

PAT - Q1 FY23			EPS - Q1 FY23
		Rs (0.73)
Rs. (9) Crore
YoY	QoQ		YoY	QoQ
	-118%	-143%
-118%	-143%

© Hikal Limited