SHILPAMED - Shilpa Medicare Ltd. Share Price

In the Q3 FY26 earnings call, Shilpa Medicare's management provided a positive outlook, highlighting strong revenue generation and operational milestones. Key takeaways include:

1. Record Financial Performance: The company achieved the highest ever quarterly revenue of INR 411 crores, a 28% year-on-year growth, and an EBITDA of INR 115 crores, reflecting a 41% increase compared to Q3 FY25. The gross margin for the quarter stood at 68%.

2. Capital Expenditure (Capex) Plans: Shilpa is planning significant capex for a large-scale peptide manufacturing facility, with completion anticipated in the second half of FY27. The projected investment for this facility is around INR 40 crores.

3. Product Development Pipeline: Management emphasized ongoing development across three divisions: API, formulation, and biologics. Notable products include:

   • NorUDCA, launched domestically, which has received favorable responses and strong order visibility for Q4.
   • Phase III studies of Aflibercept are progressing, with expectations to file for approval in the first half of FY27.
   • The API segment is set to introduce new products, including a complex injectable anticipated to be filed globally by Q4 FY26.

4. Partnerships and Market Strategies: The company has entered into various partnerships for CDMO agreements and anticipates licensing revenues as products advance through development.

5. Operational Efficiency: Management expressed confidence in improving ROCE, which saw a significant increase from 3.5% in FY23 to over 17% in the first nine months of FY26. They expect to maintain a stable debt-to-equity ratio around 0.25 to 0.26, with net debt as of December 31 being INR 625 crores.

6. Future Growth Areas: The focus for FY27 includes scaling the biologics and formulation divisions, particularly as the complex pipeline matures and new product offerings gain market traction.

Overall, management exuded confidence in sustaining growth momentum and addressing challenges within the rapidly evolving pharmaceutical landscape.

Q&A Section of Earnings Transcript

Question 1: "So, my first question is that we reported revenues for the Europe region around INR73 crores for this quarter. And also, like, the scale-up that has been there the few past quarters, does this revenue include purely product sales, or it also includes the licensing income for this product?"

Answer: "The revenue reported for the Europe region solely reflects product sales and does not include any licensing income."

Question 2: "So, similarly, for even the U.S. revenues, it just represents the market? It does not include any licensing revenue, right?"

Answer: "Correct. The U.S. revenue reported does not incorporate any licensing revenue; it purely reflects market sales."

Question 3: "Do you think about INR150-plus crores revenue now seems a base case for Formulation?"

Answer: "Yes, I believe you can assume that INR150-plus crores can be considered a base revenue level for the upcoming quarters in Formulation."

Question 4: "We are facing any challenges regarding the RoW performance?"

Answer: "The RoW market is driven by tenders, which can lead to fluctuating quarterly results. However, on a year-on-year basis, we are seeing growth in RoW."

Question 5: "Could you provide any color on the CDMO molecule that has received U.S. FDA approval expected to commercialize in Q4 FY '26?"

Answer: "I'm unable to disclose specifics about the scale of the molecule due to confidentiality. However, I can confirm we are the exclusive supply partner."

Question 6: "When can we expect to start seeing the benefits from the increased capacity in API segments?"

Answer: "You will likely see a volume ramp-up starting from Q2 of the next financial year, as we anticipate growth in API revenues."

Question 7: "Could you give an update on NorUDCA and its order book from marketing partners?"

Answer: "NorUDCA's launch exceeded expectations, and we anticipate strong growth starting in Q4 FY '26. The order book is robust, indicating significant traction."

Question 8: "Is there visibility on the commercialization of the albumin product in FY '28?"

Answer: "Yes, we see FY '28 as a realistic timeline for commercialization in India, contingent on completion of clinical studies."

Question 9: "What is the potential market size for the albumin product, especially in India?"

Answer: "While we cannot commit to a specific market size, albumin is currently in shortage globally, and our recombinant version will have significant advantages."

Question 10: "Could you provide insights regarding the licensing income, which is reportedly down over 40%?"

Answer: "Licensing revenue can fluctuate due to project timelines and milestones. We aim for a steady run rate of around INR150 crores going forward."