Akums Drugs Q1 FY25 results: Should you invest?

After Akums Drugs IPO, investors have been waiting for the pharma company to release its first quarter results for FY25. Since its beginning in 2004, the company has come a long way, from launching its Initial Public Offering to turning net losses into consistent net profit in past quarters. 

That said, let’s look at the Q1 results of Akums Drugs & Pharmaceuticals Ltd. for FY25. 

About Akums Drugs & Pharmaceuticals Ltd.

Established in 2004, Akums Drugs & Pharmaceuticals has become one of the leading pharmaceutical contract development and manufacturing organisations (CDMO) in India by capturing a 9.3% market share by value in the domestic CDMO market. By FY24, the market share by value increased to 10.0%. 

Akums Drugs operates in 15 facilities across the country to offer comprehensive products and advanced services, including modern dosage forms, clinical trials, and bioequivalence studies, to name a few. 

Akums Drugs Q1 results for FY25

Akums Drugs and Pharmaceuticals recently released its first quarter results for the financial year 2025, where the company reported a consolidated net profit of ₹60 crore. Total income was ₹978 crore in the same quarter last year, which increased to ₹1,026 crore in FY25 Q1. The CDMO segment grew 5.6% year on year, backed by strong sales growth. 

Segment EBITDA saw an increase of 15.5% with a 13.4% YoY, along with capacity utilisation growth. The EBITDA YoY of the branded and generic formulations category increased by more than twice to ₹171 million from Rs 74 million. Improved margins from branded domestic and export operations as well as reduced losses in the trade generics industry were the driving forces behind this. 

Moreover, the company reported a significant reduction in net debt by ₹212.8 crore. The debt-to-equity ratio improved to 0.25 times. 

Source: BSE

Also read: HAL Results for Q1 FY25: Is This the Right Time to Buy Hindustan Aeronautics?

FY25: Quarterly comparison of Akums Drugs results 

Consolidated Results	Jun 24	Mar 24
Net profit (₹ cr.)	61	-39
Operating Profit (₹ cr.)	128	3
Profit before tax (₹ cr.)	87	-33
EPS (₹)	4.08	-2.89

Akums Drugs share price

Akums Pharma’s share price is trading at ₹863.35 as of August 27, 2024, down by 3.39% after the Q1 FY25 results. Akums share price fell even after the company generated ₹60 crore compared to the net loss of ₹187.4 crore in the same period last year. However, Akums share price rose 7.57% in the last month.

Current financials

Here are the current financials of Akums Drugs as of August 27, 2024. 

Market capitalisation (₹ cr.)	13,722
ROCE	2.40%
ROE	-3.57 %
Debt to equity	0.80

Shareholding pattern (as of August 2024) 

Promoters	75.26%
FIIs	5.32%
DIIs	6.93%
Public	9.74%

Also read: Suzlon Energy Q1 FY25 results release: Should you buy SUZLON?

Should you buy Akums Drugs after the Q1FY25 results?

Financial performance:

1. Revenue Growth: The company’s annual revenue grew by 14.31% CAGR to ₹4,178 crore. This indicates strong top-line performance and potentially increasing market share.

2. Profitability Concerns: Despite revenue growth, annual net profit fell dramatically by -58.16%, significantly underperforming the sector’s average growth of 27.78%. This massive decline in profitability is a major red flag and requires further investigation into its causes.

3. Return on Equity: The ROE is negative at -3.57%, signalling inefficient use of shareholders’ capital. This poor return is concerning for investors.

Stock performance:

The stock price rose 8.43% in the past year. This suggests that while the company saw some appreciation, it lagged behind its peers significantly.

Financial health:

1. Debt to Equity: At 0.80, this ratio is healthy and below 1, indicating the company is mainly financed through equity rather than debt.

2. Interest Coverage Ratio: At 3.1, this shows the company can comfortably meet its interest obligations with its earnings.

Ownership structure:

Promoter Share Holding remains stable at 75.26%, indicating strong promoter confidence. Zero promoter pledges are a positive sign, reducing the risks associated with promoter debt.

Overall assessment:

Akums Drugs presents a mixed picture. While it shows strong revenue growth and maintains a healthy balance sheet, the sharp decline in profitability and negative ROE are significant concerns. The stock’s underperformance relative to its sector also suggests investor scepticism.

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Disclaimer: The information provided in this blog is for educational purposes only and should not be construed as financial advice. Potential investors should approach with caution and conduct thorough due diligence before considering a position in Akums Drugs.