The first thing that striked me as long term follower and investor in the company is the subtle sense of courage, aspiration and pride communicated by management when I was reading their annual reports
Yes there are two reports this time. In this post I will discuss Suven Pharamaceuticals and then will do a subsequent one on Suven Life Sciences. I have covered the company extensively and if you are new to the company then there is plenty of reading material here
Performance
The company has stopped given breakdown of research projects in various phases and prodding in concall also didn’t help to get this information out from management. This was a very interesting piece of data and as it provided us insight on their product mix. Also company has merged CRAMS revenue with Commercial Supplies so they are not available as seperate figures like last year
| Segment (INR Crores) | 31-Mar-2019 | 31-Mar-2020 | Growth |
| CDMO | 379 | 468 | 23.48% |
| Spec Chem | 216 | 304 | 40.74% |
| Technical Services | 50 | 70 | 40.00% |
| Total | 645 | 842 | 30.54% |
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Pretty much all segments delivered solid topline growth, the management had become competent in under promising and over delivery
DNA of Building
The company has DNA of building adjacent competency in their value chain. They had build CRAMS Commercial supplies and Speciality Chemicals divisions in last one decade and are now they are hinting to build formulations business
Although this is (Technical Services) the smallest vertical at present, it promises to emerge as one of the key growths and profitability drivers for Suven over the coming years as we add formulations into this segment.
Within two years, we expect the formulations vertical to emerge as an important business and profitability driver for the Company.
Extracted from Annual Report 2020
When a company has DNA for building additional competencies while maintaining their core , you get free call options – Heads they win big , Tails they learn something new
The company has filed 11 ANDAs as on March 31, 2020 and 3 of those secured the green light from the regulator. They currently supply commercial quantities for 1 molecule which is expected to increase to 4 by end of FY21. They have already invested INR 90 crore in a sophisticated formulations facility which will commence operations in FY21. So, when the products gain traction, the facilities will begin to deliver. On top of it they have first right of refusal on projects coming out from their associate Rising Pharma Holdings, Inc
To cater to these opportunities, INR 320-crore capex plan which includes creating a multi-vertical capacity. Out of this, INR 210 crore spend in 2019-20, while the rest will be spent this year
Future
Suven is aspiring to become a vertically integrated CDMO player from its current self taking on manufacturing and marketing of formulations
Pic Source – Annual Report 2020
I have under appreciated management and their ability to deploy excess cash even after following them for good 6-7 years, I would not be surprised if they hit even this target