H1FY24 DETAILED NOTES: • Sales for HY24 increased by 26% to Rs. to Rs 141.3 crores from Rs 112.4 crores yoy. EBITDA margins stood at 23.64%. Net profit increased by 26%

DOMESTIC OWN BRAND – 24 % growth
International API Business business – 11.8 % growth
API Business – 2 % growth
CDMO – 34.3% growth

• GUIDANCE FOR SECOND HALF: Management expects revenues for FY24 at Rs 290+ crores aided by strong momentum across all its four segments; EBITDA margins are expected to improve further.

• Beta was among the first few companies to launch Nilotinib in September 2023 and is on track to commercialize two NDDS products in Dec 2023.

• Fastest growing domestic oncology formulations company – 43.7% Revenue CAGR of branded formulations (FY21-23) – Will be the youngest Company to cross INR 100cr in oncology branded formulations revenue.

• Launch of 4 new brands – Developed 4 new API – Filed more than 30 dossiers in semi regulated and emerging markets.

• 68 products 118 SKUs – 28 New products in the pipeline – 15 NDDS formulations to be launched in the next 2 years.

Working on NDDS like nano-particles, suspensions & dry syrups – Working on off-patented products like NIB’s & PARP Inhibitors

• Domestic Formulations: Our products are cost effective due backward integration. It is helping us to get entry in a greater number of Govt & corporate hospitals.

Strengthening our product basket. It will help to get more business from each doctor.

• International Business:
o Total dossiers to be filed in various geographies – 397
o Expected to start commercialization in Brazil by FY26
o Expected to start commercialization in Russia, Belarus and Kazakhstan by FY26
o Plans to expand in regulated markets with EUGMP audit expected in Mar-24

• API Expansion Plan: • Foraying into the European market • In FY’25 planning to file 5 CEPs • Focus on export in the nonregulated, semi-regulated, and regulated market

• Plan to establish new manufacturing facility of Cosmetic-Dermatology products in next 2 years
CONCALL:
• Sales target set for FY24 was 280cr. Will do 290cr+.

• EBITDA margins are expected to improve further by Beta’s strong R&D pipeline with differentiated offerings including NDDS, FTL, and FFTL pipeline, which will help drive strong growth over the many years to come.

• Branded formulations:
o Added 5 new corporate hospitals in India – Presence in 85-90% of corporate hospitals in India.

o Plans to increase presence in Tier II – III cities – Appointing 10-15 sales people – Government District hospitals are also providing Cancer medicines, so plan to increase presence there in tier II-III cities.

• Exports:
o Signed agreements with more than 20 partners around the world

o In 2-3 years, Exports will be a major driver for the company – 2-3 years because currently registrations and filings going on. We have our major objective to file more than 200 dossiers in the coming 2 to 3 years.

o CIS Markets and Euro-Asia Audit: Euro-Asia audit will be happening in the last 10 days of December. The Euro Asia will open upfront in the entire CIS countries. We have already tied up with 2 Russian partners to register 5 products there. The same understanding is being developed in Azerbaijan and Kazakhstan as well. After this audit, we have already got the pre-audit done and there were no major or critical observations observed during the pre-audit. So, we expect the audit to go smoothly. And we will get the certification after 3-4 months of the audit. This will again open up a new front in the CIS market as well.

o We are putting our efforts in countries like even Syria, Iraq, Iran, and Algeria also.

• API:
o We are in a position to launch two more products next month, by December end, for which we are proud to say the API has been developed in-house. The total process to develop these APIs is very tough, but with all our expertise in place and being doing all these things since the last many couple of years, we are able to crack all this in the stipulated time.

o This year, we have also added one more line in the form of Kilo lab. There are many products in API which are produced in small quantities. For that, we have added one more line with a small glass reactor.

o We aim to export our API to the coming semi-regulated or unregulated markets. We have already started conversations. We have shared our prices, we shared our CS, we have shared our samples with many countries. We expect API to give a good boom in the coming months

• CDMO: We have added 1 new injectable facility with 2 new lyophilizers for having an additional extra business for the CDMO side. This will certainly reduce the timeline of the deliveries we have been telling them in the past we’ve been committing.

The new launches, which every company takes time, might be delayed by 2 to 3 months. Our focus is to give those products topmost priority. Any product which is becoming off-patent, we offer to our CDMO partners and we offer to our own domestic market as well.

• 450-500cr revenue can be achieved with current capacity.

• Dermatology:

o Today we have around 14 products. We tend to increase this product line to 35 to 40.

o This year was very great in dermatology as we are the first company in India who has signed an exclusive contract for India and Nepal markets with some Italian partners, which will be the first-time product launch in India. This has a unique combo which will be focusing only on the top 500 cosmetologists.

o We have further planned to open up our new cosmetology and dermatology plant in the next 1-1/2 years. The land and everything has been identified. The only thing is the execution has to take place. The total amount of CAPEX we look forward to invest in derma plant is close to around Rs. 30 odd crores. The main objective of derma is to do Rs. 50-crore sales in the next 3 to 4 years in own brands.

o There will be no B2B brand, all will be B2C, and this will be promoted only ethically through the doctors. Today, we have around 110-120 medical advisers on the panel. We tend to increase it to multiple folds in the coming year

o Rs. 20 crores to Rs. 25 odd crores, we will be matching the same EBITDA margins as what we are doing at the company level.

• Tech development agreement details: Transferring tech for certain countries and getting royalties and providing them APIs – There have been agreements signed with 2 companies in the CIS countries. The tech fees have already been discussed and the agreement is already signed. Maybe in another 2 months down the line, we will be having our first transfer for the tech development. Once those products are registered, after completing the tech transfer, certainly the agreement is there for a minimum of 5 years to supply the API to them as an exclusive supplier.

• Will migrate between March-May 24 to main board

• Continuous product launches planned in NDDS- Two products will be launched this month by November end or maybe maximum by December 15th. Then, there are eight more products which are under pipeline. So, the approval process is difficult. But we have already started that. Maybe the bioequivalence and everything will take its own time. So, if we see the launches of these particular further 8 products, 2 products will be launched by March, then 2 products will be launched by June or July, and then 2 or 3 products will be launched by December end.

• We will be launching 4 new products by March and 2 new NDDS which will be the first time in India. On track to commercialize 2 NDDS products which will be launched in December 2023. The second half in terms of own brands seems to be more promising with all the new launches.

• 2 NDDS Products: The market size of both these 2 products is very large. The only thing is, we have kept in mind the targeted segment. Right now, the targeted segment in this particular category has no access to a delivery system like what we have developed for these 2 products. Let’s see how it shapes up. But as far as our revenue is concerned, we are definitely expecting huge volumes and we are definitely expecting a huge market size and a transformation from those old novel products to these NDDS formulations from the doctors.

• Particular focus on expanding human resource and manpower capabilities in all different areas to support growth.

• First is that whichever product is becoming off-patent, we have started working on those products to launch those products and we are the first one to launch in India after becoming off-patent. Second is the new products which are not available in the market, like what we did with azacitidine – injection it was available, we converted into oral. Then there was one product, enzalutamide, which was coming as a strength of 40 mg. Since the patient has to consume 4 tablets, we made it 160 mg.

Hi Goofy,

You actually have hit my achilles hills . This is one of the biggest regrets I have which is not to bet bigger in those stocks at that time. But we all are wiser in hindsight.

For example, 5000 (hypothetical number) in GAEL around 9-10 years back became 90000. 1000 (again hypothetical )in Firstsource became 17000. Investment of 20k in Berger paints became 2.20 Lakhs. We do talk about it as well but nothing you can do actually.

These all stocks that you mentioned are my early investments. At that time, we just got married and were in mid 20s. Didn’t have slightest of the ideas about investing, so we were extremely cautious and fearful of what would happen if we lose money and therefore size of investment were lower.

We also purchased our first home in 2016 and at that time I liquidated some part of my portfolio and some of them were even more multibaggers such as Can Fin homes (bought at 20 and sold at 2800).

When I look back, I realised that I am not doing that poorly when it comes to assessment and stock selection. I mean 27% XIRR over 10 years is not a small achievement in my view . Therefore, by looking at what we missed, I have now learnt that if I am convinced about the idea and valuation looks cheap, I will go for big bet. All my recent investments where I have conviction such as PDS, DP wires, Panama Petrochemical, Guj Themis etc., I have invested large amounts (the max which I could have afforded). Hopefully they become multibaggers too in next 10.

Nice portfolio, excellent quality stocks and 35% returns are very good as well.

I am a great fan of Howard Marks and Peter Lync. I learned the art of rotation in stocks and making much higher returns from Peter Lynch. This gives you Portfolio high velocity to move up.

Howard marks taught me about human behaviour cycles, liquidity cycles and business cycles. Most important facts as stock prices are all about liquidity, exuberance, fundamentals and sentiments hence buy and forget is a myth.

Portfolio is yours hence I will not hesitate to liquidate my all holdings in 10 minutes in case of black swan event is anticipated. Like we are going to face in 2024.

Making money in stock markets can be via

1. Buying stocks below intrinsic value, forgotten stocks, easy to accumulate however physiologically its very tough to see you laggard when whole market is rising. Alpha created is very high when Mutual funds, DII and HNI run for stock. This is strategy i have followed till now and executed. Returns are in range of 7x to 3X on minimum. However I am very selective on keeping stock in portfolio in long term. Always looking for companies entering tough times due to some localized issues which are one off. Build large positions and sell and portion at 2-3X levels and keep it till growth vision is there for atleast 2 years else move out.

SHIL 75 to 490, TAMO from 68 to 540, apollo from 82 to 240, Vodafone from 3.5 to 12, KPR mills from 800 to 3400, PCBL from 83 to 240, AB Cap from 54 levels, still holding laggard. another laggard in portfolio is Aditya Birla Fashion, bought at 140 levels and seen stock coming down from 360 to 185, this is a long portfolio and my conviction says it is dirt cheap, holding laggard.

Force motors is a classis example, in PF from 2016 have seen stock from 2300 to 5100 , going down to 600 in 2020 and now at 4000. Only difference is my quantities are 5 times and surprisingly annualized return on investment over 7 year period are healthy as last buy was at 1300 levels. So making money can be possible with all kind of strategies but u need to be careful of what u are doing and follow discipline.

2. Buying Hot stocks where run is continuing, need to be careful of exit else returns with holding period will disappoint.

See example of Dmart, HLL, Britannia from last three years. No one has done anything, they are still excellent business, quality management, market leaders. Dmart always traded at above 100 PE stock raced from 800 to 5400 and now at 3600. Excellent results each quarter. Only change in PE correction time correction in valuation. So

Thanks for sharing such an elaborate note on your portfolio allocation ideas.

I would love to hear more about your position sizing strategy (if you have one already) since I see that many of your multi-baggers like CCL, Berger, Gujrat Ambuja etc had lower allocation.

Cheers
Goofy