Balaxi Pharmaceuticals

I attended their Q1FY23 concall and am sharing my notes.

FY23Q1 concall

• Top 3 in Angola
• They define market share as addressable market share in products going from China + India. Based on this, they are #1 in Dominican Republic, #2 in Guatemala
• African competitor: Shalina Healthcare, Prince Pharma (both are Indian cos)
• LATAM competitor: Caplin Point
• From Jan, Angola has been consolidated with business. So Q1 nos are not strictly comparable
• Volume growth of 45-50% in LATAM
• Higher gross margins in this quarter due to cross currency benefits which are one-time in nature (3.28 cr.)
• New formulation facility will cost 85 cr. and will span from Sept 2022 – March 2024. 35 cr. will be incurred in FY23 and balance in FY24. This will combination of debt + fund raise
• Existing geographies: Angola, Guatemala, Dominican Republic, Honduras
• New geographies: Nicaragua, El Salvador, Ecuador, Chile, Zambia, Central African Republic
• Focus will continue for next 5-years on these frontier markets, no plans to go to other markets for now
• Current suppliers: WHO GMP certified suppliers in China, India and Portugal
• Gross margins are higher in Angola but also expenses are higher. So at EBITDA level, LATAM markets are more lucrative (>4%)
• Projecting sales of 500 cr.+ by FY25 with same margins
• 40% sourcing is currently from China
• In LATAM, company is distributor and sell to wholesalers (working capital cycle ~ 230 days)
• Angola working capital is 150-160 days
• What is the cost structure for marketing in LATAM? Very lean cost structure vs Angola. Central warehouse (2 in Dominican Republic, 1 in Guatemala). Staffing 4 expats from India in each country. Marketing & promotion costs in Guatemala are higher because company is still new in market
• What is your network of wholesalers? LATAM – 80-85, Guatemala – 60, Angola – 1000 retailers. Angola is core market and company has direct relationship with retailers
• Projecting high single digits (8-10%) sales growth in Angola
• Expenses out all registration costs (no capitalization)

Disclosure: Not invested (no transactions in last-30 days)