The company has posted a Stellar quarter and half yearly number post covid and grown their core business at 100 percent rate. Here are few highlights of their performance :
- In the half year ended 30 September 2022, Revenue from 3b black bio has grown at 100 % rate from 11.94 cr to 22.76 cr H1FY22 vs H1FY23
- Quarterly run is continuously going up from 9.38 cr in Q1FY23 vs 13.38 cr in Q2FY23 for non covid sales. 42 % rise in QOQ sales.
- Covid sale in the half year is mere 1.5 cr from 22.76 cr. And covid sale of 50 lakh per quarter should be considered as base for foreseeable future.
- Even after 100 % rise in turnover the company is able to retain / increase the operating margin and net profit margin of 41 %. The margin has improved 40% to 48%.
- The above sale rise in revenue can easily justify one thing that management has retained most of their covid customers and have pitched in for non covid sales.
- Further the numbers does not include the recent investment in subsidiary in UK for which below is the commentary from management:
“This subsidiary was launched with a vision to accelerate the growth of TRUPCR® range of molecular diagnostic kits within the European market. We would like to mention that the UK subsidiary has successfully faced the BSI Audit for getting the ISO 13485:2016 accreditation. With the subsidiary hopefully getting the certification soon, they will start commercial production in UK itself. This will have following benefits:
A. the “Made in UK” products will have better acceptability especially in Europe and other regions;
B. with products readily available at UK office, the lead time to supply the customer orders will be reduced and the customers will be more confident in “TRUPCR” brand which will eventually lead to increase in revenue.
Although the technical team is in place now, we are working to continuously to increase the sales and marketing team. In the past few months, the UK subsidiary has participated in 3 International Molecular Diagnostic Conferences. With these conferences, the visibility of TRUPCR Europe has increased and we are getting enquiries for providing distributorships and OEM solutions through which we will expand our footprints across Europe. With enhanced visibility and full marketing team in place, the real benefits of the subsidiary will start coming in the next financial year.”
- Now looking at the balance sheet the company has cash and bank balance of approx 40 cr and investment in liquid MF and FD of more then 105 cr. Accordingly the enter price value as on today comes at 101 cr.
- A company generating operating cash flow at 27 cr per year will be free after 3.5 years compare to current enterprise value.
- The cash balance will be utilized as below as discussed by the management in the presentation :
“We have been looking for options to acquire a company in similar business area to get inorganic growth in FY22 and onwards. However, we have not been able to find a suitable company. As due to COVID, most of the lifesciences and molecular diagnostic companies are seeking very high valuations. M&A valuations globally have gone high due to demand from molecular diagnostic companies which are flushed with cash. We will only go for the acquisition if it makes financial sense and meets our internal IRR criteria. We would also be looking at share buyback in FY22/23 post merger, if we are unable to secure a desired acquisition candidate. Our aim is to create maximum value for our shareholders.”
- The much awaited amalgamation have been successfully concluded and voted in favor on 2 November 2022. We hope the process of amalgamation will be completed before the financial year end.
- In 2018 the company was offering 50 products compared to current offering of 100 products. A rise of 100 % in 4 years excluding the product in R & D stage like Rapid Antigen Vertical, qPCR Diagnostic Kits and NGS. Below is the commentary for R & D products
“Rapid Kit manufacturing plant is ready for trial runs & we are optimizing the products in R&D which have market potential, other than COVID Testing Kits. We will start with Dengue NS1, Dengue IGM/IGG to cater to the current season and keep on adding products as and when they are ready from the R&D. We will also be launching some novel products in FY 2022-23 which are under R&D Stage.”
- It was the second and only listed company to launch the covid 19 kits in the first week of April which gives clear idea of their R & D team.
- As informed by the management, the number of labs have increased and we are trying to increase our footprints for NON-COVID products in these labs. Also, we are launching new products out of R&D. We expect with the addition of new products and new customers, we will continue to grow and expand in this financial year.
- The management has given guidance that company will easily grown at 25% to 30% for next couple of years.
- To summaries the above thesis and looking at the margin of safety is high as we are getting a company:
A. Who is growing at 30% CAGR and operating margin of 45 % from last several years
B. High penetration by continuously attending international Molecular Diagnostic Conferences to spread awareness of TRUPCR brand
C. EV of 101 cr and operating cash flow of 27 cr a year
D. High products in pipe line , investment in foreign subsidiary (made in UK), amalgamation been the next triggers
E. High focus on export to get better margin (made in India and sell overseas)
F. Continues focus on signing of long term contract to have stable revenue
G. Varun daga of Girik capital is holding 12 % stake in the company
Kindly note the note was made post the result announcement. Market cap was at 250 cr approx
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