FREDUN - Fredun Pharmaceuticals Limited Share Price

In the Q1 FY26 earnings call held on August 1, 2025, Fredun Pharmaceuticals Limited's management provided an optimistic outlook, highlighting significant growth in various segments. The revenue for Q1 FY26 saw a remarkable growth of 52% year-on-year, reaching INR 119.86 crores. EBITDA increased by 62% to INR 16.99 crores, with a margin expansion to 14.18%. Net profit climbed 64% to INR 6.77 crores, resulting in an EPS of INR 14.33.

Management emphasized a current order book exceeding INR 200 crores, indicating robust visibility for future revenue streams. The company aims to capitalize on the growing global generics market, expected to grow at an accelerated pace. In addition, the Indian pet care market is anticipated to expand at over 17% CAGR, allowing Fredun to align its strategy with these growth segments.

Key forward-looking statements include a focus on scaling its new age business, which includes pet care and nutraceuticals, targeting a CAGR of 35% to 40%. By FY29, the goal is for revenue from vintage generics to remain significant while over 51% of revenue should arise from new age business segments by FY32. Management outlined ambitious targets of doubling their revenue to over INR 800 crores and PAT to over INR 90 crores in the next 3-4 years, aiming for PAT margins of around 10%-11%. Additionally, the acquisition of One Pet Stop was discussed to enhance the pet care ecosystem, leveraging a customer base of 4,000 clients for cross-selling opportunities. The company's commitment to operational efficiency and reducing low-margin products signifies a strategic shift towards higher-margin offerings.

1. Question: "I want to understand more on your generics business. Firstly, the split between domestic and export and also which therapies you're more focused on in the branded generics space?"

Answer: Our generics division started to offset OEM manufacturing. Currently, 25% to 27% of our sales come from exports, with the rest from India. We're focused on building a basket of around 350 products across 15-20 therapeutic segments to enhance our offerings. Our goal is to have this generics business of around INR250 crores to INR300 crores in the next 8 to 12 quarters.

2. Question: "What percentage of our manufacturing is own manufacturing versus what percentage do we outsource?"

Answer: Approximately 70% of our products are manufactured in-house, while the remaining 30% is sourced from third-party manufacturers as part of our OEM strategy. Our aim is to increase in-house production to reduce dependency on outsourcing and achieve greater control over quality and pricing. This shift is vital to our transition towards a fully branded model by 2029.

3. Question: "Can you give aspirational guidance for the next 2, 3 years in terms of top line margins?"

Answer: Our target over the next 3-4 years is to double our revenue, aiming for around INR800 crores top line, alongside a PAT of over INR90 crores. We anticipate maintaining margins in the 10%-11% range, supported by our higher-margin new age business that boasts gross margins exceeding 50%. Accordingly, we are also eliminating low-margin products to boost efficiencies.

4. Question: "What is our inventory and receivables as of June?"

Answer: Our inventory is currently over INR200 crores, while receivables are under INR100 crores as of July 31. Our debtor days are approximately 120-130 days now but expect continued improvement as we optimize our receivables management and align our operations with more efficient practices over the coming quarters.

5. Question: "How will the acquisition of One Pet Stop enhance your business?"

Answer: Acquiring One Pet Stop provides immediate access to a customer base of 4,000 pet owners in the MMRDA region. This acquisition allows effective cross-selling of our existing products during grooming sessions. We see this as a strategic move to deepen our market penetration and drive growth in our pet care segment alongside our existing offerings.