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Submission Details • Date of submission: June 6, 2024 • Earnings call date: May 31, 2024 • Compliance: Submitted to BSE and NSE as per SEBI regulations • Availability: Transcript on the company's website
Management Team • Featured members: • Mr. Rohan Sehgal, Whole-Time Director • Mr. Santosh Agarwal, Chief Financial Officer • Host: Ambit Capital
Financial Performance Highlights • Q4 FY24 Revenue: ₹87 crores (6% YoY increase) • Full-Year Revenue: ₹277 crores (2% decline YoY) • Adjusted EBITDA: ₹110 crores, impacted by one-off expenses • Proposed Dividend: ₹2 per share for FY24
Strategic Developments • Acquisition: Nerbe, a Hamburg-based labware company, to enhance international presence • Capital Expenditures: Progress on Panchla facility, expected production start in Q3 FY25
Operational Insights • Revenue Growth: • Domestic revenue recorded daily; international revenue dependent on shipment timing • Q4 FY24 consolidated revenue: ₹106 crores, with Nerbe contributing ₹19 crores • Profit After Tax: ₹19 crores for Q4 FY24, margin of 22% • Cash Flow: Improved to ₹105 crores from ₹76 crores in FY23
Market Challenges and Outlook • Geopolitical and Supply Chain Issues: Affecting international business growth • Future Growth: Confidence in maintaining EBITDA margins around 40% with sustainable growth
Customer Engagement and Market Strategy • Export Market Participation: Engaging in 4 to 6 international trade shows annually • ODM Sales Shift: Potential increase based on contract wins and market conditions • Cell Culture Market: Emphasis on customer loyalty and long-term research costs
Conclusion • Optimistic Outlook: Despite market instability, improvements in sales figures noted • Encouragement for Further Engagement: Participants invited to reach out for more information
Earnings Overview • Date of Call: February 15, 2024 • Revenue: • Q3FY24: Rs. 62 crores (1% YoY growth) • First nine months: Rs. 191 crores (5% YoY decline) • Domestic vs. Export Sales: • Domestic: 71% of revenue • Exports: 29% of revenue, impacted by global demand
Financial Performance • Gross Profit: • Q3FY24: Rs. 45 crores (down from Rs. 48 crores in Q3 FY'23) • EBITDA: • Q3FY24: Rs. 23 crores (down from Rs. 27 crores) • Adjusted EBITDA margin: 38% for nine months • Profit After Tax (PAT): • Q3FY24: Rs. 10 crores (PAT margin of 16%) • Cash Flow: Healthy cash flow of Rs. 83 crores for nine months
Strategic Initiatives • Acquisition: • Nerbe, a European distributor, aimed at market expansion • Future Growth: • Optimism about production capabilities and operational efficiency
Management Insights • Depreciation: • Increase due to capitalized costs; additional 20-25% quarterly increase expected • Competition: • Challenges from Chinese companies; Indian production efficiency noted • Inventory Management: • Reordering in export markets; low levels currently
Product and Market Strategy • New Facilities: • Expected 80-85% capacity utilization in 4-5 years • Product Lines: • Good traction for most products; overstock in PCR • Single-use Products: • Larger market opportunity despite similar or lower margins
Future Outlook • Commercial Production: • Cell culture-focused labware expected by Q3 FY'25 • International Growth: • Focus on North America and Europe, targeting wholesalers and distributors • Integration of Nerbe: • Gradual process with a focus on value addition over 8-10 quarters
Conclusion • Commitment: • Ongoing updates to investors on company progress and market strategies.
Acquisition Details • Date of Announcement: December 27, 2023 • Target Company: Nerbe, Hamburg-based plastic labware specialist • Acquisition Value: €10 million to €15 million • Funding Source: Internal accruals • Completion Timeline: Expected by January 2024
Strategic Goals • Market Expansion: Aims to enhance global presence, particularly in Europe. • Operational Continuity: Nerbe will continue under its current management. • Focus Areas: • Expanding geographical reach and product line. • Maintaining existing operational structure.
Financial Considerations • Revenue Projections: Too early to determine specific projections. • Revenue Decline: Nerbe experienced a decline in 2023, similar to post-COVID trends. • Valuation Rationale: Based on strategic considerations, not just current financial metrics.
Product and Market Insights • Product Overlap: Primarily in plastic labware. • Nerbe's Role: Functions mainly as a distributor with limited R&D capabilities. • Customer Base: Diverse, including big pharma and research institutes.
Future Plans and Challenges • Growth Strategy: Focus on sustainable growth rather than immediate profitability. • Efficiency Improvements: Plans to enhance Nerbe's efficiency and margins. • Market Challenges: Acknowledgment of headwinds in the life sciences industry.
Communication and Updates • Stakeholder Assurance: Regular updates on progress post-acquisition will be provided.
Date and Context • Date of Call: November 17, 2023 • Communication to: BSE and NSE on November 22, 2023 • Host: Ambit Capital
Financial Performance • Q2FY24 Revenue: INR 66 crores (6% growth from Q1 FY24) • Domestic vs. Export Sales: 65% domestic, 35% exports • Gross Profit: INR 50 crores (75% margin) • EBITDA: INR 25 crores (38.3% margin) • Profit After Tax (PAT): INR 13 crores (19.3% margin) • H1 FY24 Cash Flow: INR 59 crores from operations
Challenges and Strategies • Sector Challenges: Geopolitical tensions, excess inventory, sluggish demand • Future Growth Optimism: Strong brand, diverse customer base • Capex Investment: INR 550 crores (60% for capacity expansion, 40% for new products)
Capacity and Product Development • Current Capacity Utilization: ~70% • Future Capacity Goals: Full capacity expected in 4-5 years • New Product Focus: Complex products like cell culture to create entry barriers
Market Outlook • Revenue Projections: Potential to reach INR 700-800 crores with new capacities • International Expansion: Focus on acquiring businesses with similar products • Market Recovery: Anticipated due to destocking and high production costs in Europe
Sales and Distribution • Sales Model: Primarily through distributors • Distributor Margins: 10% to 15% • Supply Chain Management: Distributors maintain stock for 1-3 months, pay within 60 days
Environmental Considerations • Shift from Glass to Plastic: Addressing environmental concerns while managing plastic waste
Capital Expenditure and Litigation • Capex Allocation: INR 550 crores for capacity and product development • GST Litigation: Favorable situation with a pending appeal for INR 66 lakhs
Product Launches and Future Plans • Bioprocess Products: Several launched in H1 FY24, more planned for H2 • New Plant Ramp-Up: Panchla plant expected to take 4-5 years to fully utilize capacity
Conclusion • Financial Health: Sufficient internal accruals and borrowing limits for remaining capex • Management's Outlook: Optimistic about growth in domestic and international markets despite challenges.
Company Performance • Date of Call: August 14, 2023 • Revenue Decline: 9% year-on-year, totaling INR 53 crores (better than industry average decline of over 15%). • EBITDA Margin: 34%, affected by lower revenues and one-time acquisition-related expenses. • Profit After Tax: INR 9.6 crores, with a PAT margin of 15.3%.
Sales Breakdown • Domestic vs. Export Sales: • Domestic sales: 73% of revenue • Export sales: 27% of revenue • Gross Profit: Decreased to INR 47 crores, gross profit margin at 75.1%.
Employee and Acquisition Insights • Employee Expenses: Increased due to annual compensation adjustments and new hires. • Failed Acquisition: Valuation mismatch of 20-25% due to declining revenues in the target company.
Market Trends • Demand Trends: • Decline in consumables due to excess inventory from COVID-19. • Stable performance in biotech sector. • Export Revenue: Slight decline due to clients holding excess inventory.
Future Outlook • Revenue Expectations: Anticipate revenue increase compared to last year, but market conditions remain sluggish. • Order Book Growth: Approximately 4-5% for the quarter.
Capital Expenditures and Production Updates • Capital Expenditures: INR 430 crores incurred of a planned INR 525-530 crores. • Plant Updates: • Panchla plant expected to start commercial production in Q3 FY '24. • Amta plant on track for completion by end of 2023.
Inventory and Raw Material Costs • Inventory Status: INR 112 crores, slightly down from INR 114 crores in March. • Raw Material Costs: Prices stabilized, but currency depreciation has affected purchase prices.
Conclusion • Management remains optimistic about future growth and strategic direction despite current macroeconomic challenges.
Earnings Overview • Date of Call: May 29, 2023 • Revenue Performance: • Q4 FY '23 revenue: INR 82 crores (34% increase from Q3 FY '23) • Full fiscal year revenue: INR 283 crores (6% decline year-over-year) • Domestic sales: 70% of Q4 revenue; Exports: 30%
Financial Highlights • Gross Profit: INR 62 crores (75.2% margin) • EBITDA: INR 39.3 crores (47.8% margin) • Profit After Tax (PAT): INR 23 crores (27.8% margin) • Operating Cash Flow: Strong at INR 100 crores
Market and Operational Insights • Sector Performance: • Decline in revenue attributed to reduced demand for COVID-related products. • Growth driven by recovery in life sciences and pharma sectors. • Export Growth: 19% increase in export revenue compared to the previous quarter. • Panchla Facility: Expected to generate INR 500 crores in revenue; initial installations by August.
Strategic Focus • Expansion Plans: • Enhancing brand awareness in international markets. • Exploring acquisition opportunities and expanding marketing efforts. • Cost Management: • Increased costs due to hiring and salary raises; potential impact on margins. • Focus on investments rather than viewing some expenses as costs.
Future Outlook • Revenue Guidance: Uncertainty regarding achieving earlier guidance of INR 500 crores; clearer picture expected by FY '24 and FY '25. • Market Segmentation: • Limited reliance on diagnostics (15% of revenue). • Growth opportunities in serological pipettes and stable pharma sector.
Challenges and Considerations • Margin Pressures: Fixed costs rising faster than revenue; need for revenue growth to sustain margins. • Global Market Dynamics: Increased global capacity may pressure export margins; focus on quality to mitigate impacts.
Conclusion • Long-term Growth: Tarsons aims for sustainable growth through strategic investments, product development, and leveraging a strong cost-to-quality ratio. • Operational Updates: Delays in Panchla facility construction due to supply chain issues; production expected to commence by end of Q2 2024.
Earnings Overview • Date of Call: February 13, 2023 • Revenue: • Q3 FY '23: INR 61 crores (13% decline YoY) • First nine months FY '23: INR 201 crores (down from INR 260 crores) • Gross Profit: • Q3 FY '23: INR 48 crores (77.5% margin) • EBITDA: • Q3 FY '23: INR 27 crores (20% decline YoY, 43.5% margin) • Profit After Tax: INR 16 crores
Industry Challenges • Market Conditions: • Slowdown in life sciences due to recession and post-COVID impacts. • Declining demand in diagnostics and academia. • Export Revenue: • Affected by global economic slowdowns and inflation in key markets (US and Europe).
Management Insights • Future Outlook: • Anticipation of market recovery and demand stabilization. • Confidence in meeting FY '23 revenue guidance of INR 500 crores. • Capital Expenditure: • New facility in Panchla and expansion in Amta to enhance production capacity. • Revenue generation expected from Panchla facility by May 2023.
Product Development and Market Strategy • New Product Launches: • Focus on PET bottles, pending approvals. • Market Share: • Gained market share despite industry challenges. • Long-term Growth: • Emphasis on product development and branding initiatives.
Operational Challenges • Cash Flow and Working Capital: • Need for maintaining working capital due to diverse product offerings. • Marketing Costs: • Expected stabilization as revenues increase post-COVID.
Competitive Landscape • Industry Dynamics: • Increased competition and pricing pressures in diagnostics. • Concerns about excess inventory and overcapacity among smaller players.
Export Market Insights • Market Penetration: • Challenges in capturing significant share in the INR 50,000 crore export market. • Need for strategic approaches, including local offices and potential acquisitions.
Conclusion • Overall Sentiment: • Management remains optimistic about long-term growth despite current market challenges. • Future Communication: • Encouragement for ongoing dialogue with investors.