SEQUENT - Sequent Scientific Limited Share Price

Management's outlook for SeQuent Scientific Limited indicates strong growth and stability moving forward. For FY26, the company expects to maintain a healthy double-digit growth rate, aiming for mid-teens, and anticipates reaching high teens margins by FY27. The overall revenue for FY25 reached INR 15,514 million (approximately INR 1,551.6 crores), showing a year-on-year growth of 13.3%. The EBITDA margin improved significantly, expanding by 500 basis points to reach 12.9% driven by strategic initiatives such as geographical expansion and product mix optimization.

Key forward-looking points include:

1. Top-Line Growth: The goal is to achieve closer to INR 4,000 crore in revenue within the next 2-2.5 years.
2. Margin Expectations: SeQuent aims for EBITDA margins to approach 20%, utilizing efficiencies gained from the ongoing merger with Viyash Life Sciences.
3. M&A Synergies: The merger is expected to enhance R&D and manufacturing capabilities, leading to faster growth and the potential entry into new segments like companion animals.
4. Product Launches: Continued investment in new product developments, especially in Europe and emerging markets, with efforts to double the contribution from companion animal health products over three years.
5. API Growth: The API segment, deemed critical, is projected to begin accelerating with several new products set for commercialization.

Overall, the management conveys confidence in achieving sustainable profitability and growth through strategic initiatives while navigating the merger process effectively.

Major Questions and Answers from the Q&A Section of SeQuent Scientific's Q4 FY25 Earnings Call

1. Question: "Going ahead in FY '26, what would be the outlook for the growth and margins?"

   Answer: We're pleased to have achieved our guidance for mid-teen margins and double-digit growth this year. While we can't provide specific guidance for next year, we aim for SeQuent to reach high teens margins by FY '27. Our top-line growth should remain healthy in the mid-teens over the next two years, bolstered by Viyash's performance, which aims for margins in the 20% range.

2. Question: "Is there any plan for us to enter into the CDMO business? What are the opportunities?"

   Answer: Yes, expanding into the CDMO business is key for us. We already have relationships with several innovators and are pursuing complex product development agreements. The interest from specialty companies in Europe and the U.S. indicates strong opportunities. We've signed contracts recently, and we're fully equipped to meet regulatory expectations, aiming for substantial sales growth in the next few years.

3. Question: "What is the expected tax rate for SeQuent for the next year?"

   Answer: We anticipate a tax rate between 25% to 30% moving forward. The higher tax rate this quarter is due to adjustments across geographies, but we expect this to stabilize in the upcoming years, maintaining the revised range.

4. Question: "Can you provide insights on new launches in the companion animal health segment?"

   Answer: Our focus on companion animal health is growing, particularly in Europe and Latin America, with new anesthetic products launching this year. We aim to double the contribution of companion animal health products within three years by consistently introducing new products every quarter.

5. Question: "What caused the sequential drop in Viyash's revenue and margins?"

   Answer: The decline was mainly due to inventory build-up in the U.S. formulation facility, as customers stocked up in previous quarters. While there was a small decline in revenue, it did not signify any gross margin drop.

6. Question: "What growth drivers do you see in Europe, and what products are sold there?"

   Answer: Our European growth stems from expanding our gut health and anesthetic product lines. We focus on natural additives for feed and have developed a distribution network for vaccines, which has significantly increased our market presence and contributed to margin improvement with a better product mix.

7. Question: "What outlook do you have for Viyash's revenue growth in FY '26?"

   Answer: We are confident in a more sustainable growth trajectory for Viyash, exceeding 20% in the coming years, driven by new product launches and maintaining strong growth in existing products, enhancing our overall market share.

8. Question: "Could you discuss exceptional items in FY '25 and their expected continuity?"

   Answer: The significant exceptional items relate mostly to merger expenses and accelerated share warrants. We expect many of these costs to dissipate in FY '26. While some merger-related amortization will persist, we anticipate a substantial reduction in overall nonrecurring expenses by FY '27.