First ever concall by DDev Plastiks
Posts tagged Value Pickr
Apex Frozen Foods (27-05-2024)
Insider Trading Penalty by SEBI:
While imposing a penalty of Rs32 lakh, market regulator SEBI directed Apex Frozen Foods Ltd (AFF)’s promoter, chairman, and managing director (CMD) Satyanarayana Murthy Karuturi, his wife and promoter Padmavathi and their son in law Ravi Kanth Sankuratri to disgorge Rs91.06 lakh earned illegally while in possession of unpublished price-sensitive information (UPSI). Does Market dicsounted the said matter…?
Caplin Point Laboratories (27-05-2024)
Q4FY24:
• US Market FY24 revenue at ₹313.36 Crores; 51% increase Y-o-Y. Caplin Steriles Ltd revenue crosses ₹100Cr for the first time in Q4 FY24
• Free Cash Reserves at ₹910.5 Crores
• Company Oncology division under Caplin One Labs goes commercial. Company expects the entity to turn profitable within 6 Quarters, since multiple product registrations already available in existing markets
• Company has shortlisted 25 Softgel products to be filed in Mexico over the next 24 months, with all BE studies being done at Amaris Clinical, the in-house CRO facility of the Company
• Company has 6 Injectable products approved in Mexico with a further 23 products under review. Plans to file 50 products overall in the next 12 months, both from internal pipeline and outsourcing partners, a repeat of Caplin’s collaborative strategy in Central America
• Company draws up plans to enter niche segments of Biosimilars and other Biologics such as Insulin, initially with a “Fill-Finish” concept, which would be manufactured in line with requirements from Regulated markets
• Company receives three Ophthalmic product approvals from FDA, with one product launched and the other 2 to be launched in Q2 FY25. Total approved ANDAs under Caplin name – 21
• Company will launch 11 new products in the US in the current FY, in several niche segments of Injectables, including Ready-To-Use Bags, PP Vials, Injectable Suspensions, and Ophthalmic Solutions
• Caplin Steriles USA Inc makes quick progress with nearly 25 (out of 50) states licenses available already. Company aims to launch own labelled product in US by Q2 FY25
• Company has 14 ANDAs under review, with 3-4 approvals expected within coming months. Products under review are combination of Suspension and Emulsion Injectables, Ready-To-Use Bags and Ophthalmic Solutions and Emulsion
• Company has filed several products in non-US markets such as Canada, Australia, Mexico, South Africa, China etc. Some approvals and launches expected within FY25 for these
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• Completed R&D for 80+ APIs to be used for backward integration in US 5 and Emerging markets. On track for first DMF filing by FY25
CONCALL NOTES:
• INVIMA APPROVAL: Recently, INVlMA concluded the audit in our CP-1 facility at Pondicherry successfully for soft gel capsules. We will be now in a position to reach our products, especially soft gel in Mexico, Chile, and other major geographies of Latin America. We are also constructing a tablet and capsule section and remodelling the injectable to go for INVIMA inspection in one to two years from now.
• CHILE: We have also completed registration of 85 products in Chile. We are sending one of the managers from Guatemala to Chile in June to open a new warehouse, which will also increase our business for the current year.
• MEXICO: We received six marketing authorizations from Mexico. We have filed 23 products; another 10 products are getting translated in Spanish for filing shortly. Out of 21 products filed in Mexico, 12 products are from Chinese companies that are EU and U.S.A approved facility.
The product that I mentioned in the form of 21 to 22, they are all actually injectables. And this is going to create another asset light model for us actually in Mexico as most of the products have come from China.
Once we complete the registration of 25 to 30 products, we will start our own warehouse and then we will get into the private market. Maybe two years from now, we are sure to see actually sufficient business coming up from Mexico.
We are not going to register actually 20 to 25 products immediately, because Softgel capsules which you mentioned, especially softgel capsule it takes time because you will have to go for a bio studies. We will start softgel capsules of OTC to start with.
• I will be traveling to China to meet some of the big companies for our future business, which again is the asset-light model for biological products.
Now, my visit to China is to source value added products such as insulin, biosimilars and peptides which are only manufactured by the deep pocketed corporations of India. We outsourced primitive products in the earlier stages, now we are planning to go for biological products, which we are sure will bring hard value to the company. And we will import these products in bulk and we will do the full finish in India and export it from India to other countries where we are currently operating now.
• OUTSOURCING BENEFITS: Statistics of our export of three products in 2006 as well as now: We exported 6 lakh capsules of amoxicillin in 2006 from China to South America, whereas we are currently exporting close to 350 million capsules of the same product, which is an increase of 600 times. We also exported 5 lakhs tablets of paracetamol in 2006, currently we have exported 150 million tablets which again is an increase of 300x. We also exported ceftriaxone powder injectables of 50,000 vials in 2006, now it is 5 million vials, 100x increase.
The purpose of telling this one is not to invest in CAPEX, which of course it’s not easy to get the return on investment, especially for the product where China is very competitive. These products are sourced from the top companies such as CSPC and Rayon Pharmaceutical. We also test these products in our own facilities in the form of QC in China and once again in Guatemala in Central America to make sure that the product is in line with international standard. If the quality is not good, I am sure we would not have grown in the last 18 years of our presence in Latin America.
• Caplin Steriles:
Caplin Steriles had an EBITDA of Rs. 61.2 crores, with the PAT of Rs. 18.7 crores.
The revenue is also backed by a good growth in overall output. We went from 16 million vials last financial year to around 27 million vials.
Our company has been built on a solid foundation of asset-lightedness for quite some time. So, even in the U.S. and regulated markets, we feel that this is something that can be repeatable. So, we are at the early stages of discussing with other CMOs where we can slowly start to transfer some of our work high volume but low value products so that we can start to focus only on niche molecules for in-house manufacturing.
Front-end in the U.S: (Because as a company we have always been very focused towards having control from the marketing end of things, which is what our entire Latin America business is, right.)
We are trying to do something a little bit different to the tried and tested model of supplying to GPOs and larger wholesalers, etc. We want to evaluate an opportunity to go direct to hospital, direct to clinic, hospital chains, etc. Even though this might take a little bit longer, this might result in slower top line growth, we feel that this is a much more sustainable and more value accretive kind of a method. And whoever that we speak to in terms of the team that we are trying to build up over there, they seem very excited by it because people by and large in general are quite tired of the amount of consolidation that has happened with the fronting with the GPOs, etc.
• We have another pipeline of 35 products that are under active development that we will be filing over the next two to three years. But now we are also starting to focus a little bit more towards developing very niche global dossier kind of molecules which is something along the lines of GLP-1 products which are your anti-obesity, anti-diabetes kind of peptide injectables.
• LINE 6 DETAILS: Line 6, which is a prefilled syringe and a cartridge line, and this is the one that is being qualified right now. In the next one month I think all qualifications will be completed. And our new peptide injectable products for global markets will be manufactured out of this line.
• We always believe that inventory closer to the market is our strength and which is being proved time and again, whenever there is a shortage, whenever there is an opportunity, we quickly cash on the opportunity
• ACQUISITION: We keep the cash for future acquisition. We may not be very keen to acquire a manufacturing company, we would be interested in acquiring a distribution company. The reason is, you are aware that we always remove the intermediaries and go for the last mile, be it in the form of pharmacy or be it in the form of hospital. Suppose if you are in a position to get some distribution company in the bigger geographies, that will open up the opportunity to understand which is the last mile in this part of the world. So, that one is I feel is a good opportunity for us to go for a meaningful, that’s one of the meaningful opportunities. Rest, of course, we will have to cross the bridge when we reach there, because this is one area which I am sure it will be very unique. The rest of it, of course, we will have to see it and after that we will believe.
• Next two years sales growth to be in range of current growth numbers
• Once we complete the registration in markets where we are very comfortable in the form of Latin America, then we will move to U.S. for OSD.
• BIOSIMILARS: Whereas coming to biosimilars, there are only 15 to 16 factories maximum in India, whereas there are around 100 factories in China. Now they have over capacities and underutilization. This is a time for us to go for bulk import. And then the timelines, of course it’s not easy to predict at this juncture. Luckily, we have an injectable facility and we will be in a position to be fill-finishing the same face. But the clinical trials will take time. It depends upon the market where we are entering into, we will go for the ROW market which of course we can even do with Phase 1 trials. If you have to get into a regulated market, then you have to think of Phase 3. But we will never be in a position to think of U.S., because it is a place for monopolies, and near-monopolies. So, we will concentrate on markets where we are comfortable now. We will also go for the second level regulated market, something like Mexico, Brazil, South Africa, that kind of stuff.
• We should also take into account that some of the products that we are doing are slightly more built kind of generic products. So, we do expect some amount of reduction in orders for the older products. So, it’s important for us to have a wide enough portfolio that some new products or some other products are going to be placed anytime there is a downturn in other ones
• COMPETITION/COMPETITIVE ADVANTAGE DETAILS: Coming to their competitors in general business, virtually to be very honest with you, there is no competitor for us, because we are there for the last 20, 21 years, in one or two markets we have been there for 18 years.
Although we are in the smaller geographies, we are more monopolies in these smaller geographies. We are very unique and there is an entry barrier in the form of like 20 years, 22 years. Anybody who has used our product comes back and buys the product most of the time. And again, this is a business where people who are like, if you see the disparity between the top companies, most of the multinational companies and us, the disparity in prices is huge. If our products are $2, the same generic which is sold by a multinational company or a big company from Argentina or other areas, at least 4 times to 5 times higher than our product.
Most of the guys who used to buy these products earlier also switched on to our products because we have been there for a long time. If you are any company for that matter, if he is there in the market for 20 years, it is bound to do good. It’s true saturation comes, but to handle the saturation we go for variety and novelty. We started with 20, 30 products. I can even tell you it is in front of me. From India today we have registrations in the form of 4,485, whereas from China it is 275. And there was a time we used to be 60% of our business from China, then it got reduced to 40%, now it is 20%.
• Now what we will do, once we go to China, when I travel to China, I look for opportunities for the ROW market to start with, because there is no entry barrier. If products are unique and it’s going to be accepted in the market, I will open up the opportunity by sourcing from that company. So, like this we change our strategy to suit to the requirement of our customers and market. This is what is taking us to the next level, because we started with increased product registration, then hopefully of registration from normal primitive products to CNS, CVS, diabetics like various ranges we included. Then from tablet capsule, liquid oral suspension, ointment, injectables, suppositories, like that we go. Now we are planning to get into peptides and then go for insulin, go for biosimilar initially for the ROW market where we are currently there.
• Sir, do you see this strategy, which had been working for you in terms of having more registrations, more varieties, etc. Do you think the competitors also might start following similar kind of strategy and the intensity might increase? Because despite having 75% of the portfolio in generics, we make quite good gross margins. So, would it attract more competition? Because if I take the example of India, in the trade generic segment people do not make that kind of gross margins. So, I just want to understand if we talk about five, 10-year horizon, can competitive intensity increase and thereby erode your margins and growth profile?
It’s not the generic that counts, it is the business model differentiation. Had I sold my generic in India, we would not be talking to each other, to be honest with you. That’s the reason I tried my best in Africa, especially in the toughest part of Africa thinking that I won’t have any competition. But our own people, we used to stay in English colonies, moved to the Portuguese and French colonies. That was the time I went to countries where I didn’t see the Indians and Chinese who are into pharmaceutical business. But once you get into that place, if you prolong for 10 years, what was the period the physical risk was there for the family? And we were subjecting our family to the physical risk and establish our products
The people who are used to your product, especially the generic, do not go to the doctor, they bring the tablet, they bring the strip and show it to the chemist and buy. And while working in the market, I myself have found and I asked the chemist also, see you have given the product that the customer showed to you, why do not you change the product and give it to him? The answer which he told me is, if I change the product and give it to the customer, the next time the customer will not come to my shop, he will go to the other shop. So, there are so many things which matter in this business, it is not one thing. As I told you before, if the competitor wanted to encroach into our area, they could have done it by now. Our business is getting increased year on year. If they had really encroached into our area, the business would not have increased in the last 20 years. It all started with small way, but the entire business 75% to 80% of our business comes only from six smaller and geographies of Latin America.
So, now that there is a Chinese wall in the form of entry barrier. And even as my son, that’s why I told you, once again I repeat. The purpose of asking is to find out how far they have entrenched themselves into our territory. It’s not much, it’s not easy also. Even if I have to go and do business in a country where somebody else is there for the last 20 years in the form of generic business, it’s can’t be easy for me to get into this terrain, it is not easy. That’s how the generic model works. The only issue is you have to ensure good quality, affordable prices, then variety, the novelty, you have to increase, keep various warehouses next to the customer so that the customer understands there is no logistic issue. Even if he buys the product, if there is some quality issue, he can return the products to the warehouse. On the contrary, if you want to buy the product, he has to open an LC. Or even if he goes for some other company which has got only 10 products, what we will say is, if you are buying 10 products from my competitor, do not buy other products from me, you go and buy from him. Automatically he will give it and come back to us.
• So, if I were to distill down our edge in the business, it really is our customer relationships that you have been able to build over the years, and that’s where we are also thinking of strengthening our distribution system because that’s going to be a double strength thing for us. So, coming back to the edge that we have in our business, so we have always been able to have better relationships with the local businessman and local people that have helped us to scale our businesses, even historically. Is that the thought process to have a better distribution channel going forward to improve our edge of marketing and distribution, plus also sourcing at better prices if I were to distill down our edge?
C. C. Paarthipan: Correct, what you say is true, because the edge is it’s better to go for a distribution rather than going for something in the form of marketing where we have to invest money and do it. But when we go for distribution of a generic, the most important factor is the differentiation in your business model. To directly go and copy someone who is already a giant, it’s not easy for us to beat it. If you want to be a numero uno, even if it is a smaller business, you cannot run faster than a person in the form of a giant. You will only have to run in the opposite direction. That’s what we have been doing in most of these countries also, we are not trying to copy the big boys. We are trying to do something on our own, which we call unique and this works. And that’s what the COO also told you when it comes to what we are planning to do in U.S. market also. And mostly it is possible in the private market, not in the tenders.
• So, even in the U.S. injectable business, it’s our goal to get private contracts with the same thought process and playbook that we have perfected over the years? C. C. Paarthipan: Yes.
Companies With First ever concalls OR Investor Presentations (27-05-2024)
First Presentation by Delton Cables Ltd
Prataap Snacks Ltd – Set for a crunchy bite! (27-05-2024)
it looks like 1000 to 2000cr mcap mark is possible to grow till, post that very difficult to grow further
Jindal saw – Another beneficiary of India’s growth story (27-05-2024)
What one-time 34% growth are you talking about? Debt to Equity is still around 0.50 while Apl Apollo and Jai Balaji have a Debt to equity of around 0.30. Byways APL Apollo isn’t a fair comparison as it is in a league of its own manufacturing premium products mostly meant for end consumers, not businesses.
Jindal saw currently trades at a PE of 10 while Jai Balaji or JTL trade at 2x 3x of that. This huge gap isn’t sustainable either they come down or this goes up. I think a PE of around 15 is fair for a company like Jindal saw. Why not the same as the other two? Because it lacks the spiciness that the market likes, it’s just a healthy old school business.
Samarth’s Portfolio & Learnings (27-05-2024)
Hi Samarth,
It would be good if you could also share other details like holding period of these stocks, your rationale, the type of investor you are; etc.
Patels airtemp limited (27-05-2024)
Mar 24 results are out, company posted revenue of 370 Cr in comparison to 280 cr , also profit has been increased to approx. 15 cr. Company seems to be getting benefit of the new infrastructure whereby they have started increasing the turnover with some cost benefits. Industry expectations are also high so if company executes well in coming 2-3 years it can reach a good scale as the scope of growth is quite high. Historic problems of low profit has to be seen…
Nazara Technologies (27-05-2024)
Interesting developments - promoter sold 6% to Plutus. With that it seems promoter share is around 10%.
In past CEO resigned and operation is took over by Nitish M. However performance seems subdued. I believe company is facing operational challanges and institutional investor seems to take front seats.
HCG hospital is one such example where institutional investor tookover management control and appointed their CEO. Can this happen here???
Disc: Invested earlier, exited for more than a year due to performance challanges.