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IBLHL - FY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 24, 2023)

AKD, Off the Analyst's Desk IBLHL - FY23 Analyst Briefing Takeaways IBLHL held its analyst briefing session today to discuss their FY23 financial performance. Brief points from the session are produced below: • Management expects to close FY24 at a topline of ~PkR4.9bn vs PkR4.0bn in FY23. The bottom line remained under pressure due to high inflation and other factors, however, the company expects to maintain margins since majority of their products do not fall under price control regulations of DRAP. • Furthermore, management apprised of future product launches within the pharmaceuticals and nutraceuticals segment and company plans to introduce canderal coffee and cranberry extract within the health and wellness segment. • Company is focused on medical devices business, which has a range of newly launched products. • In response to a question regarding price increases, the management stated that they have a target profit margin to maintain across the product portfolio to ensure profitability on all individual products. They mentioned that Mead Johnson increased prices internationally, hence, this required upward adjustment in local prices as well. However, management did not state any increase in number terms. • FY23 revenues grew by 10%YoY, of which 2% growth is attributable to Mead Johnson products (nutrition segment). The management stated that the growth could have been larger, had it not been for a price increase in Mead Johnson products (in line with their international price increase), but the said price increase has not affected demand significantly. Mead Johnson products share 34% in the total revenues of the company. • Other segments, apart from nutrition, clocked 18%-19% growth in revenues, and cumulatively shared 8% out of the total 10%YoY growth in revenues. • Company’s dependence on Mead Johnson (imports) is reduced to 30% this year, from 70% in 2019, in line with management’s objectives. The reason remains to move towards localization of formulations and reduce reliance on imports, in order to minimize imports related risks. • With regards to new products’ addition in the portfolio, management stated that they have surpassed their budgeted revenue growth rate of 21% to clock in 97%-98% growth in 1QFY24. They are confident that the committed growth rate will be achieved easily in the full year. • With regards to Enfagrow’s premium pricing in comparison to other brands, the management clarified the intention of keeping a 30%-40% premium over their competitors due to the high nutritious and brand value. The gap continues to grow, but sales remain intact since the company ensures to market the brand’s high positioning (high income niche), still garnering interests from large supermarkets such as Imtiaz, Al-Fatah, ecommerce channels, doctors, clinics, and other customers. • Searle’s nutraceutical plant is active, and around 15 new products including vitamins, amongst others are in the pipeline, for which the Searle will be the toll manufacturer for IBLHL. AKD Research