Disclaimer – Below Analysis is NOT a BUY/SELL/HOLD Recommendation. It is for educational purpose and it can be used for educational purposes further. There could be lot of things which might have been missed in my analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Supriya Lifesciences – CMP 386 (Dated 24-02-2022)

Supriya Lifescience Limited got incorporated in the year 2008 and became one of the key Indian manufacturers and the supplier of APIs.

Business —

Supriya sells 38 API focused on the diverse therapeutic segments, along with being the largest exporter of Chlorphenamine Maleate, Salbutamol Sulphate, Ketamine Hydrochloride and Esketamine from India.

Supriya Lifescience is a pioneer in segments like antihistamine, analgesic, anesthetic, vitamin and anti-asthmetic and anti-allergic.

Region of operation—

Company is focused on regulated markets and company is more export oriented with 77% revenues coming from exports

END USER INDUSTRIES — Kind of evergreen and growing industries in coming decade

• Antihistamine
• Anti-allergic
• Anesthetic
• Antiasthmatic and
• Vitamin therapy

Moats —

Backward integrated business model with well established presence in the API manufacturing, with focus on high value products with limited competition. Backward integration of top 12 products generating 67% of revenues thus de-risking many issues on supplies, pricing

Niche product basket of 38 APIs across diverse therapeutic segments

Advanced manufacturing and research and development capabilities with ability to handle complex chemistries across varied chain of reactions

Strengths

Pioneer in segments like antihistamine, analgesic, anesthetic, vitamin and anti-asthmetic and anti-allergic and clear leader in top three products having more than 50% share

Diversified export profile –Exports to 86 countries

Global clientele with long standing relationships on the back of consistent product quality & reliability of supply

Diversified therapeutic categories

USFDA, EUDQ, EUGMP, NMPA, CEP grants and approvals in place

Experienced senior management team and qualified operational personnel with new generation started in company already

Shareholding

Promoter has sufficient skin in game with holding ~68% and other prominent players in DII/FII holding 18% more leaving only 13-14% to general public

Some triggers and updates from recent Q3Fy22 Concall

Getting portfolio derisked and adding more categories which are complementing existing therapies

Expansion of manufacturing capability and capacity, scaling of existing molecules and addition of new products

Entering CDMO space

Growth in European region

Q4FY22 inputs from company

Risks (tried to see major risks, please do due diligence to understand more on this part)

Company earnings are quarter dependent with some quarters showing better growth than other quarters, it will take company few years to balance this up and down quarters with new products filling up

Export oriented risks ( freight risks, currency risks, geographical risks)

Risks associated with pharma companies on USFDA etc. kind of approvals

Any delay in CMO, CDMO projects ramp up which is expected by Q2FY24 (Aug-Sep 2023)

Any delay in ramping up Amber Nath facility (expected Dec2022)

Any sell off by FII/DII can lead to quick price erosion

Financials

Company is showing Good revenue growth with increasing Gross margins and reducing Debt to equity profile

Valuations —

Current valuation look to factor in immediate growth for 1-2 quarters but if we keep our horizon long and vision as shared by company, then valuations seems reasonable (estimated PE of 16-19 Q1FY23E with CMP 386). Increasing capacity utilization and profitability can lead to rerating of company

Your strategy can be different than mine. Your selection of company might be different than mine. So lets not be a BLIND FOLLOWER

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It is for educational purpose and it can be used for educational purposes further. There could be lot of things which might have been missed in my analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

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