VIMTA LABS Q2 CONCALL: RETAINS ₹700 CR FY28 REVENUE AMBITION & 35–36% EBITDA MARGIN GUIDANCE; TARGETS 20–25% REVENUE CAGR, ₹80 CR FY27 CAPEX & EXPECTS PHARMA, CLINICAL AND FOOD TESTING RECOVERY IN H2

• FY28 Revenue Guidance: Management reaffirmed confidence in its previously communicated approximately ₹700 Cr revenue ambition for FY28, supported by pharmaceutical testing, preclinical research, clinical services and newer business opportunities. • Revenue Growth Guidance: Management expressed confidence in its medium-term revenue growth ambition of approximately 20–25% CAGR, despite slower growth during H1 FY27. • EBITDA Margin Guidance: Management reiterated confidence in its medium-term 35–36% EBITDA margin expectation, while acknowledging potential pressure from changes in business mix. • Medium-Term Margin Outlook: Management indicated that EBITDA margins could moderate by approximately 100–200 bps over the medium term as biologics and other newer services increase their contribution. • Near-Term Margin Outlook: Management does not expect significant margin changes over the next few quarters, supported by operating efficiencies and better fixed-cost absorption. • H2 FY27 Revenue Outlook: Management expects H2 performance to improve compared with H1, supported by conversion of pharmaceutical project inquiries and recovery in food testing volumes. • Quarterly Revenue Guidance: Management did not provide specific revenue or profit targets for Q3 or Q4 FY27. • Pharma Business Outlook: Management expects pharmaceutical research and testing demand to improve as delayed customer projects move toward execution. • Pharma Order Pipeline: Customer inquiries and requests for proposals have increased, although management highlighted longer decision-making cycles. • Pharma R&D Recovery: Management expects improvement in pharmaceutical research activity after a temporary slowdown associated with major customer filing and approval cycles. • Peptide Testing Outlook: Management indicated that peptide-related business was strong in FY26 and could recover over the coming quarters as customer research activity resumes. • Large Molecule Opportunity: Management expects biologics, biosimilars and other large-molecule products to become important long-term growth drivers for pharmaceutical analytical services. • CRADS Growth Outlook: Management expects Contract Research and Development Services for large molecules to improve during Q3 and Q4 FY27 as customer proposals convert into projects. • Biologics Commercialization: Company commenced revenue generation from its biologics services business during Q2 FY27. • Biologics Revenue Contribution: Current revenue remains modest, with management expecting the business to become meaningfully larger over approximately two years. • Biologics Customer Acquisition: Management is in discussions with multiple prospective customers and hopes to onboard at least two additional customers during Q3 FY27. • Biologics Growth Opportunity: Management indicated that successful conversion of larger customer projects could accelerate revenue contribution within the first two years. • Biologics Investment: Management indicated that approximately ₹20–25 Cr has been invested in developing biologics research and development capabilities. • Biologics Asset Turnover: Management targets approximately 1:1 revenue-to-investment productivity for the biologics business, potentially by its third year, with earlier achievement possible if growth accelerates. • Biologics Project Ticket Size: Smaller process development and yield improvement projects typically have potential contract values of approximately ₹1–1.25 Cr. • Biosimilar Development Opportunity: Full lab-scale biosimilar development projects could have contract values of approximately ₹4–7 Cr or higher. • Biologics Customer Strategy: Company is targeting both established pharmaceutical companies and smaller biotechnology firms seeking outsourced development capabilities. • Biologics Cross-Selling: Management is using existing pharmaceutical customer relationships to expand into biologics and biosimilar research services. • Biologics Capacity Expansion: Additional reactors may be installed as customer demand increases, with investments phased according to project requirements. • Preclinical Growth Outlook: Management identified preclinical research as one of the company's strongest growth drivers. • Preclinical Historical Growth: The preclinical business has delivered approximately 30% CAGR over the past four years. • Preclinical Demand Drivers: Management highlighted increasing demand for investigational new drug studies, pharmacokinetic testing, large-animal studies and research involving new chemical and biological entities. • Preclinical Capacity Expansion: Company is expanding its large-animal holding facilities after reaching capacity constraints during H1 FY27. • Preclinical Export Opportunity: Management indicated that discovery-related preclinical research is primarily export-oriented. • Preclinical Customer Mix: Domestic clients contribute approximately 30–35% of certain regular safety and impurity testing activities, while discovery projects have a higher export orientation. • Clinical Research Recovery: Management expects clinical research performance to improve as new customer contracts begin contributing after an extended business development cycle. • Clinical Research Challenges: The business faced pressure following the loss of certain major customers during FY26. • Clinical Research Sales Cycle: Management indicated that converting new clinical research clients into executable business can take approximately 12–18 months. • BA/BE Capacity: Company currently operates approximately 180 beds for bioavailability and bioequivalence studies. • BA/BE Expansion Strategy: Management does not plan to increase the number of clinical research beds and instead intends to diversify its customer base and improve utilization. • Clinical Trial Research: Management is developing its clinical trial business across therapeutic areas and exploring additional international opportunities. • Clinical Trial Business Outlook: Management indicated that the business remains at an early stage, with additional efforts needed to establish a larger recurring project pipeline. • Food Testing Recovery: Management expects export-import food testing sample volumes to recover progressively during Q3–Q4 FY27. • Food Testing Sample Utilization: Sample activity has recovered to approximately 60–70% of normal levels, compared with around 30–40% during the earlier slowdown. • Food Testing Recovery Timeline: Management hopes food-related sample flows will return toward normal levels during Q3 or by Q4 FY27. • Export Testing Challenges: Higher freight and insurance costs have led customers to reduce sampling frequency, affecting testing volumes. • Domestic Food Testing Expansion: Company is increasing its focus on domestic food manufacturers and customers to reduce reliance on import-export testing. • Domestic Customer Acquisition: Management indicated that several new domestic food testing customers have been added during the slowdown. • Electronics Testing Outlook: Management expects growth opportunities from electronics manufacturing, defense localization, electric vehicles and increasing certification requirements. • Electronics Capacity Expansion: Company has doubled its EMI/EMC testing chamber capacity in Hyderabad after reaching high utilization levels. • Defense Testing Contribution: Defense OEM customers currently utilize approximately 70–80% of the company's electronics testing capacity. • Electronics Revenue Outlook: Management expects the business to grow, although its current smaller scale may limit its contribution to consolidated revenue growth over the next couple of years. • Electronics Testing Business Model: Management highlighted that EMI/EMC testing is generally linked to product development and certification rather than recurring batch-level testing. • Environmental Testing Strategy: Management intends to focus on high-value testing opportunities within its existing PPM services rather than expand broadly into additional environmental testing categories. • Pharma Analytical Customer Mix: Management indicated that the contribution of major customers varies by quarter, with top-client concentration broadly ranging around 25–35% in certain periods. • Pharma Customer Relationships: Management continues to maintain long-term relationships with major pharmaceutical customers, although individual orders are generally awarded project-wise. • Overseas Pharma Revenue: Approximately 40% of pharmaceutical analytical revenue comes from overseas customers, as referenced during the discussion. • Overseas Project Realizations: Management indicated that international pharmaceutical analytical projects typically command higher values than comparable domestic work. • FY27 Capex Guidance: Management maintained its planned capital expenditure budget of approximately ₹80 Cr. • Maintenance Capex: Approximately ₹45–50 Cr of the FY27 capex budget is earmarked for maintenance and regular equipment replacement. • Growth Capex: The remaining approximately ₹30–35 Cr is planned for analytical capabilities, service expansion and incremental business requirements. • Capex Deployment: Management expects expenditure to be distributed across preclinical testing, food testing, small-molecule and large-molecule analytical services. • H2 Capex Outlook: Management indicated that capex utilization was slower than planned during H1 and expects spending to accelerate during H2. • Infrastructure Capacity: Company's approximately ₹100 Cr laboratory infrastructure investment is designed to support growth over the next 5–7 years. • Laboratory Expansion Strategy: Management does not expect major additional laboratory building requirements for existing services over the next several years. • Future Equipment Investment: Incremental equipment and technology investments will be made according to customer demand and service requirements. • Capital Efficiency Strategy: Management aims to achieve approximately 1:1 revenue generation against regular incremental equipment investments over time. • Employee Productivity Strategy: Company intends to support revenue growth through productivity improvements rather than proportional increases in employee numbers. • Workforce Strength: Management indicated that the employee base remains approximately 1,400, with an intention to improve productivity using existing resources. • FTE Business Contribution: Fewer than 5% of employees are engaged under the full-time-equivalent customer service model. • Employee Cost Outlook: Management expects productivity improvements primarily to offset rising industry manpower costs rather than deliver substantial reductions in employee expense ratios. • Borrowing Strategy: Management indicated that incremental borrowing was undertaken partly because the financing cost was attractive relative to using internal cash. • Liquidity Strategy: Company intends to retain financial flexibility for potential investment opportunities. • Balance Sheet Position: Management described the company as net debt-free, with cash and cash equivalents of approximately ₹70.1 Cr. • Return Ratios: Management acknowledged some moderation in ROE and ROCE during H1, partly due to changes in the capital base and additional borrowings. • Q2 Total Income: Total income increased 9.9% YoY to ₹114.9 Cr, compared with ₹104.5 Cr. • Q2 EBITDA: EBITDA increased 10.5% YoY to ₹40.8 Cr, compared with ₹36.9 Cr. • Q2 EBITDA Margin: Margin stood at 35.5%. • Q2 Net Profit: PAT increased 3.5% YoY to ₹20.6 Cr, compared with ₹19.9 Cr. • Q2 PAT Margin: Margin stood at 17.9%. • H1 Total Income: Total income increased 11.8% YoY to ₹227.8 Cr. • H1 EBITDA: EBITDA increased 13.2% YoY to ₹81.9 Cr. • H1 EBITDA Margin: Margin stood at approximately 36%. • H1 Net Profit: PAT increased approximately 7.3% YoY to ₹41.7 Cr. • H1 PAT Margin: Margin stood at 18.3%. • Key Challenges: Slower pharmaceutical R&D project conversion, delayed clinical research customer onboarding, subdued food export testing, biologics commercialization timelines, service-mix margin pressure and rising manpower costs remain important factors.

VIMTA LABS LIMITED

← Back to feed