Natural Capsules - Foray Into Steroidal API Space To Accelerate Growth: Systematix

Systematix Research Report

Natural Capsules Ltd. is traditionally a capsule-manufacturing company that has recently forayed into the active pharma ingredient manufacturing space by investing around Rs 1,300 million in steroidal APIs (under the production linked incentive scheme).

Currently, India imports steroidal APIs worth Rs 15,000 million annually, and Natural Capsules believes it would be able to substitute about 20% of this demand through its capacity.

Commercial scale operations of steroidal APIs are likely to begin in Q3 FY24, and gradually scale up to full capacity (potential to generate Rs 2,500–3,000 million in annual sales) over the next three years.

At peak utilisation, the company expects to achieve Ebitda margin (without PLI incentive) of around 22%. It is eligible for a cumulative PLI incentive of Rs 670 million over the term of the scheme. In its traditional capsule-manufacturing business, Natural Capsules is aggressively investing in capacities (tripled capacity in last three years) and venturing into high-margin categories like Hydroxypropyl methylcellulose, vegetarian capsule.

Until 2019, the company was a laggard in capsule manufacturing, but it managed to scale up the business after it introduced customised machines to manufacture five million capsules per day (exclusively developed by a machinery manufacturer).

The new machines allow operational cost savings of 15 to 20%, enabling Natural Capsules to tap larger customers like Abbott India Ltd., Pfizer Ltd., Alkem Laboratories Ltd., Cipla Ltd., Ajanta Pharma Ltd. – that need suppliers who can offer a quick turnaround.

The company supplies capsules for reputed branded products like Becosules and Pan-D. The stock currently trades at 21 times FY23 earnings per share.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.