Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Syngene International Ltd (BOM:539268, Financial) reported a sequential revenue growth of 13% in the second quarter, indicating positive momentum.
- The company is seeing increased interest from large and medium-sized BioPharma clients, particularly in biologics and small molecule process development projects.
- Syngene International Ltd (BOM:539268) successfully concluded around 60 audits in the first six months, a 35% increase year over year, reflecting strong client engagement.
- The company is investing in expanding its capabilities in biologics, with new manufacturing capacity expected to come online in the second half of the year.
- Syngene International Ltd (BOM:539268) is focusing on dual sourcing and supply chain resilience, offering clients alternatives to China, which is gaining traction with about a third of clients opting for this option.
Negative Points
- Revenue from operations for the quarter was down 2% year on year, and 3% in constant currency terms.
- Operating EBITDA decreased by 4% to INR245 crore, and profit after tax was down 9% year on year.
- The company experienced a decline in raw material costs by 11% due to a shift in revenue mix, but staff costs increased by 12% year on year.
- Other operating costs increased by 16% year on year due to maintenance and expansion of facilities.
- The company expects revenue growth for the year to be at the lower half of its guidance range, indicating potential challenges in achieving higher growth targets.
Q & A Highlights
Q: Can you clarify if the positive signs of recovery in the discovery services business imply growth on a year-over-year basis or just sequential recovery?
A: The broader message is that the shape of the year is turning out as predicted, with a relatively flat first half but growth on a full-year basis. We expect healthy growth in discovery services both sequentially and year-over-year. The second half should look good, indicating a rebound and recovery in growth.
Q: Is it fair to assume that momentum will build from the record quarter and continue into FY26? Also, do we need to build up capacity in terms of medium-term opportunities?
A: We have sufficient headroom for growth in terms of capacity, infrastructure, and people. The constraints on growth are more about client demand and service delivery rather than capacity limits. For the medium to long term, we are continuously expanding and deepening our capabilities to meet market demand.
Q: What are the drivers for clients to choose Syngene over competitors during pilot processes?
A: Clients look for capability, competitiveness, timely delivery, cost, quality, scientific creativity, and value for money. The China plus one strategy and supply chain resilience are also factors, but fundamentally, it's about delivering on these core aspects.
Q: Regarding the Stellus facility, where are we in terms of product development, and when can we expect commercial benefits?
A: We are still in the engineering and upgrading phase, converting the plant from vaccine production to antibody manufacturing. This is a new capacity play, providing headroom for future growth rather than immediate revenue generation.
Q: How does Syngene plan to compete within India given the China Plus One bias and evolving landscape?
A: Competition is beneficial as it drives up industry standards. We compete globally and do well, focusing on maintaining high standards and leveraging the China Plus One strategy to attract business. We are open to expanding geographically if it aligns with strategic goals and shareholder value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
