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Lincoln Pharmaceuticals Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤23rd Feb 26

Summary : Lincoln Pharmaceuticals reported strong Q3 FY26 results with significant revenue and profit growth, driven by domestic and export expansion, and outlined ambitious plans for R&D, regulated markets, and a INR1,000 crore revenue target.

Management Perspective positive : We are going on the right track, and we will be achieving good numbers by the end of the year. Our growth and the target for INR1,000 crores is still there, and we will achieve it anyhow. We are expecting more business to grow.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 revenue increased to INR166.32 crores from INR146.55 crores year-over-year.
  2. EBITDA grew to INR38.74 crores from INR32.63 crores in Q3 FY25.
  3. Net profit reached INR28.60 crores, up from INR20.77 crores last year.
  4. EPS for Q3 FY26 was INR14.28, compared to INR10.37 in Q3 FY25.
  5. The company is targeting a consistent growth rate of 12% to 18%.

Future Growth Prospects

  1. Expanding product portfolio in niche domestic and international markets.
  2. A dedicated R&D center is expected to be operational within 2-2.5 months.
  3. The Cepha block is targeted to achieve INR90-100 crores in revenue by next year.
  4. Aiming for INR1,000 crores revenue target, potentially by FY28 or within 6 months thereafter.
  5. 24-25 CDMO projects are slated for commercialization in regulated markets.

Management Insights

  1. Management is focused on consistent growth and diversifying into regulatory products.
  2. Prioritizing inorganic growth opportunities over increasing dividend payouts.
  3. Substantial cash flow is invested in secured loans and advances yielding 10-12% returns.
  4. R&D expenses are planned to increase from 1.8-2% to 3-3.25% of revenue.
  5. The company aims to grow shareholder wealth and maintain strong financial health.

Signs of Skepticism

  1. The long-term INR1,000 crore revenue target might be delayed by 5-6 months.
  2. Dividend payout remains low despite substantial cash flow, with management prioritizing inorganic growth.
  3. Management did not provide specific details on market share in top 5 brands or price vs. prescription stickiness strategy.

Risk Factors

  1. Geopolitical situations caused minor fluctuations in quarter-to-quarter results.
  2. Currency fluctuations can lead to delays in money flow from export markets.
  3. Achieving the INR1,000 crore revenue target might be delayed by 5-6 months.
  4. Trade barriers in the industry could impact future returns and growth.

Good To Know

  1. The company's dividend payout has been negligible, with management considering revisions.
  2. Loans and advances are primarily secured ICDs, generating 10-12% returns.
  3. Exports contribute approximately INR400 crores to revenue, with Africa being the largest market (~40%).
  4. Health Canada has approved 6 manufacturing lines, with expected revenue of $10-15 million from Canada.
  5. The company operates on a B2B model for exports, utilizing country managers rather than own distribution setups.

Key Drivers

  1. New R&D center to boost product development.
  2. Cepha block revenue ramp-up to INR100 crores.
  3. Regulated market approvals driving export growth.
  4. Diversification into niche therapeutic areas.

Key Analyst Discussions

Competitive Environment

  1. Top domestic brands include Trixon, Vivian, Mobyle, and Tinnex, particularly in the ENT segment.
  2. Market share varies by country in international markets due to different segment presence.

Financial Highlights

  1. Management is internally discussing revising the dividend payout policy.
  2. Loans and advances are secured ICDs, providing 10-12% returns on substantial cash flow.
  3. R&D expenses are projected to increase from 1.8-2% to 3-3.25% of revenue.
  4. Other income is generated from dollar exchange differences and returns on reserves.
  5. EBITDA margins are expected to be between 15% and 18%, with a target to exceed 18%.

Product Composition

  1. Highest prescription growth areas are anti-infectives, respiratory, metabolism, urinary, hormones, and muscular pain.
  2. The company has 17 different product line items, with tablets and injectables as top sellers.

Strategic Considerations

  1. Long-term growth to INR1,000 crores will come from existing facilities, new dossiers, Cepha block, and regulated markets.
  2. Regulated market contribution is expected from Canada ($10-15M) and potential EU approvals by May-June.
  3. Inorganic growth focus is primarily on tableting and injectables, with future consideration for oncology/hormones.
  4. Promoter shareholding will gradually increase, prioritizing company investment with additional funds.
  5. FIIs are investing based on positive results, while DIIs have market cap criteria for entry.