3B Blackbio DX Ltd

[kartik_bhat]

@sawhneyvivek

Don’t you think that Covid business was black swan event for them and otherwise not too much achievements in kitty for kilpest/3B Black Bio?

Watch the video shared by @enelay earlier if you haven’t still. Where Dr Goel mentions about them having more than 100 molecular tests- from infectious diseases to oncology to human genetics.
Pre covid – the key challenge was spreading awareness about their kits and how to expand their business.
In a way, what Covid has done is provided them a platform to educate labs about their non-Covid kits & make them aware of the benefits.
Some of these slides from FY 20 on their R&D capabilities & presence are good indicators about the mgmt & the business

	FY 19	FY 20	FY 21
Customers	150+	180+	400+
Cities	37	50	80+

Continuing further on the numbers front, during pre Covid, - it was a business generating free cash flows, ROCE of 60%+ & high operating margins. Doubled its revenue from FY 18 to FY 20. Something which stood out to me at that time.
Overall company EPS doubled in same period. Stock did not move / was flat probably owing to perception of ‘being a microcap’ in a bear mkt and drag due to the agrochemical business.

Disc: Invested since lower levels

[Vineetjain111]

About Rs.1.5cr in sales (domestic + exports) of covid kits. Domestinc selling price down to 65/kit.
They are discontinuing the monthly business updates henceforth. Looks like this will be the cap on monthly covid revenue (unless ofcourse there is a third wave, God forbid)

That puts the covid revenue to about 25cr in Q1. And from Q2 onwards it should drop to less than 5cr, unless exports pick up. So we’re probably looking at about 80-85cr top lin in FY 22 (40cr covid and 40-45cr non-covid), unless there are any major changes.

I think I will be in no hurry to average up. Seems like there should be opportunities to add at better prices over the next six months, especially after Q2 results.

4c10b9a1-1550-4c60-8a30-7e6888f878df.pdf

[enelay]

Update on vaccinations.

[enelay]

Important transaction in the Indian diagnostics space. Molbio’s business is more directly comparable with 3B Blackbio than the likes of Dr. Lal Pathlabs, Thyrocare etc.

• Temasek in talks to acquire 15% stake in Molbio Diagnostics for ₹1,500-₹1,800 crore - post-money valuation of ₹12,000 crore ($1.6 billion).
• Molbio had revenue of ₹1,300 crore and Ebitda of ₹750 crore in FY21
• Last round from Motilal Oswal PE a year ago happened at a valuation of about ₹1,600-₹2,200 crore

https://economictimes.indiatimes.com/industry/healthcare/biotech/temasek-in-talks-to-buy-into-covid-test-kit-maker-molbio/articleshow/84328758.cms

Mylab did around ₹800 crore of revenue last year - won’t be surprised to see them raise at $1b+ valuation in this market too.

[sahil_vi]

@enelay

Molbio’s business is more directly comparable with 3B Blackbio than the likes of Dr. Lal Pathlabs, Thyrocare et

While this is true, molbio is also not a great comparison. They make pcr machines too. Muuuuch higher up the value chain than 3bbb and MyLab.

[arjun0s]

Have you had a chance to look at ‘Genome Diagnostics’. It seems like a comparable business to 3BB. They seem to have wide array of PCR panels, extraction kits and reagents.
They used to export PCR kits in 2016, I don’t know what happened to them after that. I am trying to understand more about the private space competition for 3BB. I am asking this in hopes that we might be able to see the ‘market share’ dynamics for PCR kits and Molecular Dx business in general.

Also, thank you for all the content you have shared here.

[enelay]

Sorry, I have not come across this company. A good place to find names of molecular diagnostics players is in the ICMR kit validation lists (e.g. Diagnostic Kit Evaluation) and industry body membership lists (e.g. :: Association of Diagnostics Manufacturers of India ::).

Some of the names that stand out to me are Agappe Diagnostics, Angstrom Biotech, Athenese Dx, Meril Diagnostics, Molbio, Mylab Discovery, Nextgen Invitro, Sidak Lifecare, Trivitron Healthcare, and Ubio Biotechnology.

[vnktshb]

Does someone know when amalgamation of diagnostic subsidiary will happen and 1.07mn new shares be issued?

[Marathondreams]

As per investor presentation

[enelay]

Good results.

• Steady 60%+ PBT margins despite pricing pressure in Covid kits.
• Non-Covid revenues appear flat QoQ and up 20% YoY. Non Covid business (domestic + exports) is still not running normally due to the pandemic. Barring any major 3rd wave, hopefully Q2 and Q3 will offer a more “normal” quarter for us to evaluate the new post-pandemic run rate of the business. My hypothesis is that we can see 10 cr+ quarterly revenues in the non-Covid RT PCR business once things open up.
• Cash balance of ~120 cr now, providing 6-7 cr in interest income
• A bit surprised by how long the antigen kit launch is taking. Any leads on what’s happening here?

disc. Invested & biased

[Ashwath]

Despite a good Q1 results, 60% upwards PBT margins, with the management emphasizing on creating value for SH as the top priority, even willing to buyback shares in FY22/23, Kilpest is down almost 20% in the past 1 month. Trading well below it’s median PE with a good growth score as well, any idea what is happening?

[MHS]

My 2 cents:

This is how investors behave, when there is sale on financial markets, exactly opposite to sale on Amazon/flipcarts/any supermarket, they panic, instead of buying.

why everyone in every thread questioning when stocks are getting corrected. No one ask a reasonable question when stocks are going up and up and up, even without earnings support, off course that is not the case in Kilpest.

Correction is part of financial markets and more so in midcaps, small caps and much more in mirco caps.

Best thing is try to learn and adopt to volatility, understand the ART and SCIENCE part of investing and think correction is healthy and that companies are cheaper today than yesterday.

[enelay]

Good discussions in both the Dr Lal & Metropolis con calls for those tracking broader diagnostics trends. Two takeaways - 1) Non-covid is still soft 2) Covid tests are here to stay.

[arjun0s]

The Annual Report 2021 for Kilpest India has been shared on their website but it is not yet on the exchange - https://kilpest.com/upload/Kilpest%20Annual%20Report%202021.pdf

For those who have followed this thread and the recent investor presentations, there seems to be nothing much new in the Annual Report at least from a quick read. The management discussion and the director’s reports are not talking much about future growth plans. I am assuming that they are keeping a lot of the plans close to their chest because coming out in public domain is not going to help very much.

Edit - They have shared points on the scheme of amalgamation for Kilpest into 3B BlackBio Biotech. Couldn’t find a mention of listing on NSE in the AR but they did mention it even in the last investor presentation, so it will happen in time, I guess.

They mentioned that they are working on developing Antigen / Rapid card type tests, I see that as good.

From what I understand by reading RHPs of recent IPOs of diagnostics labs, molecular diagnostics is urban centric and it will take time for rural areas to start installing such technology. Kilpest / 3BB mentions that it will take time to spread their customer base in molecular diagnostics, take time to develop the trust in India. . Even the medium sized diagnostics labs like in the latest IPO Vijaya DIagnostics, seems apprehensive of the expense of getting into Molecular Diagnostics.

One thing is that molecular Dx growth in India will be slow but the other thing is that the growth is going to look almost like J-Curve exponential when it comes. It will probably be around the time when almost all the large players are near to completing their necessary capex to shift to Molecular diagnostics and NGS type testing. Still good for the long-term investor.

They did not talk much about exports except that they are venturing into export markets. They said that 3BB is being viewed as ‘on-par’ with foreign multinational by big labs. This sounds good.

Going by a recent CRISIL study of the diagnostics space that has been mentioned in a few of these recent Diagnostic company RHPs, pathology testing commands a higher share of the diagnostics market. Typically, a battery of tests is prescribed under a single pathology test panel for a single patient. CRISIL estimates that Pathology tests are 57% of the market while rest are radiology, implying 43% of the market. This makes an addressable market size of Pathology tests of 40,470 crores. Pathology tests are expected to grow at a CAGR of 12% or more from FY 2020-23, with an estimated market size of Rs. 550 billion or 55,000 crores.

The products made my 3B BlackBio Biotech maybe commanding a much smaller portion of this market size in its revenue pool. Maybe 1/10th of that testing revenue may go to testing kit makers so 4000 crores market size (roughly). While I have no numerical basis to say this, it is a fair assumption that most diagnostic chains and in-hospital diagnostics facilities are still to complete their shift towards molecular diagnostics. This is due to the (at least) perceived high cost of ‘technology advancement’.

Copying from Vijaya Diagnostics RHP

“High cost of technical advancement - Risk for Diagnostics centres
Diagnostic centres have to constantly upgrade their technology to stay ahead of the competition. However, these upgrades not only involve significant capital investment, but also increase maintenance cost, thereby increasing overheads. Capital intensity is higher for advanced radiology and molecular diagnostics, which require high-end equipment.”

Of course this is the case of a smaller, regional diagnostics chain and the larger players are already making this shift but it appears to me that current cross selling opportunities in India are limited. The AR 2021 mentions that the subsidiary is a market leader in India and well recognized so the first-mover advantage might play out.

Trying to figure out the market size for testing kits in India and the competitors market share in Molecular Diagnostics has been a bit difficult.

Edit - Related reading - Article from February 2020 - Molecular Diagnostics A Path To Improved Healthcare - BW Healthcare

[tamal.datta]

Are they going to sell their Agrochemical business?

[Siddhesh.K]

Siemens Healthineers starts making molecular diagnostic kits in Vadodara

A Big player entering Molecular Diagnostics.

[ravish]

Siemens entry can also be seen like entry of an MNC in to a growth industry. These MNC knows much more then anyone and how to play it.
They have been doing same in other countries also. May be i m biased about Kilpest. As per the article “This comes in the backdrop of the heightened awareness and need for the molecular testing infrastructure in the country amidst the Covid-19 pandemic.” will augur well for Kilpest. Investors should not forget that earlier these kits were imported and now Made in India, is a big shift for the industry. Also the exports are more profitable. First mover advantage is the key for any player in this industry, no one would be changing their supplier for few bucks here and there.
In my opinion Kilpest should look to build its own RT PCR Testing Machines like Molbio and thermofisher does. Dixon or other contract manufacture can make for them. This should be put in the Ears of promoters in upcoming AGM.

[sahil_vi]

@Siddhesh.K

A Big player entering

To my mind this is was and will remain 1 possible risk to kilpest. Indian market is not that large. My sense is they might target exports. This is simply the capital cycle. Capital chases highest returns. Will be interesting to see how it plays out.

[vnktshb]

Someone like Siemens might take a call to acquire a company like Kilpest also!

[enelay]

I had asked Mr. Dubey about the threat of big players entering the market in Feb this year. I think at that time there was an article about Thermo Fisher planning to make test kits in India. His reply was that he would fire the guys in India for trying to do such a small business relative to the size of Thermo Fisher globally The market will grow with the entry of new players, its far too early to worry about losing market share