SMS Pharmaceuticals Limited (SMS Pharma), a Hyderabad based diversified and fully integrated pharmaceutical company, with interests in Active Pharmaceutical Ingredients (API) and Intermediates announced its financial results for the quarter ended 30th September, 2023.

Commenting on the results, P. Vamsi Krishna, Executive Director – SMS Pharmaceuticals Limited said, “The second quarter of fiscal year 2024 has witnessed a sustained positive trajectory in terms of enhancing operational performance. The company's revenue grew by 5% y-o-y to Rs. 167 crores, primarily driven by robust growth in ARV (Antiretroviral) vertical. The growth in top-line is majorly on account of much improved volume growth, as few of our verticals witnessed significant decrease in price realization due to prevailing market conditions. As per our analysis, we anticipate the encouraging volume growth to continue in H2FY24.

The Gross Profit Margin for the second quarter of fiscal year 2024 experienced a modest decrease compared to the previous quarter, primarily attributed to the rise in Fuel and Power Cost. Furthermore, it is worth noting that there has been a marginal uptick in Other Expenses when comparing year-on-year figures. This can be attributed to the rise in business development expenditure, the advance payment of US FDA regulatory fees, and the escalation in both freight rates and insurance premiums.

The rise in Employee Cost can be attributed primarily to the augmentation of our workforce in response to improved business prospects.

In the second quarter of fiscal year 2024, our operating profit demonstrated a substantial increase of 105% to reach Rs. 28 crore. The company's net profit for the current quarter amounted to Rs. 12 crore, marking a significant turnaround from the loss incurred in the second quarter of the fiscal year 2023.

The ARV business has exhibited a notable resurgence, with sales of ARV experiencing a commendable upswing, with the tendering activity in the ARV business also picking up pace.

The Ibuprofen segment has exhibited a positive trend of month-on-month growth, indicating a steady increase in its performance. Our analysis suggests that the market landscape for Ibuprofen is poised for significant transformation in the foreseeable future. The company exhibits a strong capacity to capitalize on any prevailing market deficiencies, thereby positioning itself favourably.

The Sitagliptin segment has exhibited commendable performance and is anticipated to maintain positive momentum in the upcoming year. We have a prominent presence in the European market, and currently command an impressive 40% market share for the active pharmaceutical ingredient (API) of this particular product.

The decline in revenue share generated by the Anti Diabetic portfolio can be attributed primarily to price erosion. However, it is worth noting that the volume growth has demonstrated resilience, maintaining a steady upward trajectory and exhibiting recent signs of acceleration. In addition, it is important to consider the impact of the high base effect, given the exceptional performance by this segment in Q2FY23. It is important to note that the Anti Diabetic portfolio has demonstrated sequential increase in its quarterly share. The company is also strategically implementing a backward integration strategy to safeguard and enhance the profitability of its Anti Diabetic product line. Our Anti Diabetic vertical exhibits a robust order book, indicating a favourable outlook for future.

Our current capacity utilization would be in range of between 50% to 60%. By the end of FY25, we should be inching towards the 75% capacity utilization mark. Going forward for full year, we will be able to maintain the Gross Margin and EBITDA Margin at about the same levels that we have achieved in H1FY24, provided we don’t have any major escalation in the geopolitical issues.

Our products are well-positioned to meet the growing demand for APIs and intermediates in India and overseas. We stay committed to developing new products and technologies, which will enable us to maintain our competitive edge in the long term. We are cautiously optimistic that this positive trend will continue for upcoming quarters as well. We are also expanding our product portfolio and capacity, which will help us to drive future growth.”