Akums Drugs tanks 10%, falls below issue price on weak Q2 earnings

In two days, the stock price of Akums Drugs has declined 19% to Rs 645.30 and fallen below its issue price of Rs 679 per share.

Akums Drugs share price: Pharmaceutical company Akums Drugs and Pharmaceuticals (ADPL) shares were locked in 10 per cent lower circuit at Rs 645.30 apiece on the BSE in Tuesday’s intra-day trade. 

 

The fall in Akums Drugs share price came after it reported a weak operational performance for the second quarter ended September 2024 (Q2FY25). In two days, the stock tanked 19 per cent from Rs 796.60 on Friday, November 8.

 

The stock of the pharmaceutical company has fallen below its previous low of Rs 716.95 touched on November 11. It is trading below its issue price of Rs 679 per share. ADPL made its stock market debut on August 6, 2024. With today’s decline, the stock price of the company almost halved from its 52-week high level of Rs 1,174.85 hit on August 20.

 

 

In Q2FY25, the company’s earnings before interest, tax, depreciation, and amortisation (Ebitda) declined 28 per cent year-on-year (Y-o-Y) at Rs 134.7 crore. Margins contracted 290 bps to 12.9 per cent from 15.8 per cent in Q2FY24.  The company’s revenue decreased 12.5 per cent Y-o-Y to Rs 1,033 crore. Profit after tax (PAT) was up 9 per cent Y-o-Y at Rs 66.7 crore.

 

Ebitda for contract development and manufacturing organisation (CDMO) segment, constituting 77 per cent of revenue decreased to Rs 122.7 crore in Q2FY25, from Rs 188.2 crore in Q2FY24. Margins declined to 15.4 per cent, as against 20 per cent in the same quarter a year ago.

 

The company’s management said Q2 was a challenging quarter faced with continued sluggish demand, despite that the company was able to grow on Q-o-Q basis at revenue, Ebitda and PAT levels. The comparison of this quarter vs prior year quarter is differentiated by research and development (R&D) project income which was exceptionally high last quarter, it added.

 

The Y-o-Y comparison reflects the impact of lower active pharmaceutical ingredient (API) prices and fluctuating demand, which Akums remains optimistic, will stabilise as it expands its footprint. Q2 business performance reflects the muted volume demand and low API prices. The management said the company remains committed to its long term vision of being a global CDMO player.

 

As a CDMO, Akums produces an extensive range of dosage forms including tablets, capsules, liquid orals, vials, ampoules, blow-filled seals, topical preparations, eye drops, dry powder injections, and gummies, among others. Since inception, Akums have manufactured 4,146 commercialised formulations across over 60 dosage forms. The Key clients are Alembic Pharmaceuticals, Cipla, Dabur India, Dr Reddy’s Laboratories, and Sun Pharmaceutical Industries etc.

 

ADPL’s profitability continues to be vulnerable to pricing pressure as it is present in a very competitive industry. However, the contract manufacturing business has generated stable operating profit margins over the past few years. ADPL’s profitability is also exposed to fluctuations in raw material prices, which continue to impact the OPM of its API business, ICRA said in recent rationale.

 

ADPL also continues to remain exposed to legal and regulatory risks, including scrutiny by regulatory agencies, product liability matters, inclusion of more drugs under national list of essential medicines (NLEM) and other commercial matters. ICRA has also noted two summonses received by the company and/or its Directors from the Directorate of Enforcement (ED) in recent years. While ED has not taken any adverse action in these matters, ICRA would continue to monitor the developments therein, the rating agency said.

 

The Stable outlook for the long-term rating reflects ICRA’s expectation that the company will continue to benefit from its established business position and long relationships with its key customers, enabling it to generate healthy internal accruals.