Sequent Earnings Call highlights:
- very positive opening comments on demand recovery, passing on costs to end customers in next two quarters.
- management expects better margins starting next quarter, full impact from Q4. Fy23 is expected to be very good.
- API business which shown a degrowth in H1 would show good growth in H2 such that flat numbers are expected for the year.
- Albendazole API which saw lack of demand due to pause in deworming program is African schools by WHO, is pickig up now as schools are reopening.
- Currency depreciation in Turkey is a positive as exports becomes more competitive.
- Turkey was never planned to be a global production hub its meant for emerging markets- mainly Africa and Middle East. Germany is their production hub.
- Cautiously observing political developments but definitely not foreseeing any significant challenges
- They typically have demand visibility for next 12 months as 75% of their revenue comes from regulated markets where customers give one year projected requirements.
- Customers move to them due to supply chain integration. Manish said even the originators are looking at sequent because it makes more commercial sense to procure from sequent than to produce themselves.
- While their supply dependency on China has significantly decreased to around 15% levels last year, there is indirect dependency as their other suppliers are dependent on China. Manish expects a significant shift of the overall market away from China in next three years.
- Their strategy to gain larger wallet share from the top 10 animal health companies of the world has a limited success till now while there has been an engagement. With Carlyle group coming in, they have set up a dedicated team for this purpose to closely work with the top 10 players and increase wallet share.
- vaccine manufacturing unit in Turkey to commercialize in Fy23, Indian unit would commercialize in Fy24. Not to disclose the opportunity size.
- confident of gaining the growth lost this year in the coming years with their new initiatives like vaccines
- Formulations - Alivira Italy started 2 years back has achieved EBITDA breakeven. They are launching Alivira Germany and Alivira UK. Expecting a mid teen growth, high teen growth is expected once US business is commercialized.
- Distribution for formulations- the focus is on the production animals which requires less field force. For pet animals they target cities in India Turkey and Brazil again the field force requirement is low.
- Couple of acquisitions planned in H2.