Natural Capsules: Future prospects for this micro-cap manufacturer?

Natural Capsules, which is a top-growing manufacturer and supplier of high-quality capsule shells for pharmaceutical, nutraceutical, and dietary supplement industries, has reported quarterly results for the March quarter of FY23 this week. For Q4FY23, the revenue declined 7.92% YoY to Rs 38.93 crore from Rs 42.28 crore in March 2022. Meanwhile, net profit stood at Rs 3.37 crore, a slippage of 33.79% YoY from Rs 5.09 crore in the same period of the previous fiscal year. EBITDA margins decreased by 194 basis points on a YoY basis.  

Commenting on the results, Sunil Mundra, Managing Director of Natural Capsules Ltd said, “Despite the challenging operating environment in the domestic pharmaceutical industry, we have managed to maintain our volumes without experiencing any declines. We believe that the period of declining realisations is behind us, as evidenced by a gradual rebound in realisations in Q1 and our anticipation of further increases throughout the year”. 

Meanwhile, the company has announced positive developments, with regard to an exclusive distribution agreement for the capsules in the Mexico market. This presents a significant opportunity considering Mexico’s high import of capsules. Sales recognition is expected to commence in Q2 of the current financial year.  

Additionally, the company is setting up HPMC lines for the upcoming quarters. The commencement of HPMC lines is expected to drive top-line growth and improve the margin profile of its capsule business.  

On the API front, the company is expected to start selling small commercial batches from Q2 of this financial year and gradually increasing production. The focus shall lie on rapidly ramping up operations.  

Natural Capsules Limited (NCL) is a hard capsule shell manufacturer, that pioneered the manufacturing of vegetarian capsules in India and is the second-largest Indian manufacturer of gelatin capsules. The company is now foraying into API manufacturing with complex high-end patented technology developed in-house, under its subsidiary company Natural Biogenex Private Limited.  

On Tuesday, the NATCAPSUQ share price is down 0.65% to trade around Rs 372 levels at the Bombay Stock Exchange (BSE).