My untrained mind could not parse the legalese – but looks like it’s headed in the right direction.
Hoping this gets sorted out in H2’23.
Disc.: Invested
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Kilpest Q4 results summary
3B Black bio standalone revenue of 14.5 crore Q4 FY23.
Annual non covid revenue from 3BB is 44.13 Cr for FY23 up from 26.5 cr in FY22 (+66%)
Manchester site is going to contribute greater numbers from next year, mentions about high volume annual order of Hemato-Oncology assays from a very reputed lab in UK.
Quaterly presentation has more details about tru-RAPID & tru-NGS products.
Reverse merger process in progress, next NCLT hearing on Jun 23 (Over 2 year now 
) , management believe its in final stages and should be completed soon.
NSE listing/potential buyback will be done once merger is completed.
Personal opinion: Company is very technologically capable and has right business approach focusing on Europe and other affluent countries. My confidence in the management increased with the way they handled huge profit they received from Covid, they are looking for acquiring company in similar business area but only if it meet internal IRR criteria. They announced plan for an acquisition in January, but cancelled it after due diligence.
Communication is poor (no earnings call) and reverse merger situation is quite frustrating. Other than that looks like a decent candidate for long term compounding.
Disclaimer- Invested and everything mentioned above is personal opinion, not a stock recommendation. Please do your due diligence before investing.
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Any idea on why the NCLT hearing is dragging for 2 years. I keep getting new hearing notification only but getting postponed again by few months.
You can check the NCLT order @Apurva_Dubey uploaded above. I am not at all an expert on the legal matters, but from what i understand there doesn’t seem like any concrete blockers. Usual delays in indian beurocracy with the red tape, paper work etc…
Looking like hearings are on final stages. Let’s see how the next hearing goes
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The merger is definitely a case of when and not if. There don’t seem to be any reasons for it to not go through, at least not that we are aware of. I would like to believe that the management would have let us know had there been issues - they have been quite transparent on most matters so far, including their handing of cash.
That apart, on pure fundamentals, Kilpest is trading at an EV of well under 5 times non-covid sales. This for a business with gross margins over 70%, fast growth and cash rich looks like a lot of margin of safety. I would like more information on the cash conversion though - receivables continue to be quite high and impact the ROCE. I wish they did concalls!!
Disclosure: Invested with about 6% of my PF. Added some after the result as execution seems on track.
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Kilpest india came up with good set of numbers for the quarter and year to end. Few our key highlights from the investor presentation
- Achieved big milestone by reaching non covid sales of 50 cr on which NPAT is 26 cr converting in to margin of 51 %.
- Q4 of 2022-23 achieved turnover of 14.5 cr vs 11.5 cr in Q3 registering a growth of 25 %.
- Export sales is 10 cr out of 50 cr. Consistently growing from nil in 2019 to 10 cr in 2023
- On a investment of 9 cr for The UK subsidiary in September 2022, it has achieved turnover of 2 cr in the in current year. Expecting the JV company to touch turnover of 10 cr in current year.
- In 2018 company has 50 product whereas now in 2023 it has reached to 120 products.
- Participating in international tenders directly and through our distributors with which we have secured a few annual rate contracts for our assays in a few Middle-East, South-East Asian and European countries. These contracts will add value to our business and give a strong market standing to our products globally.
- Discussion with large international distributors for various projects which will be materialized in the next financial year.
- Starting June’2023, the UK subsidiary will start the manufacturing of assays and the assays to EU customers will be supplied as “Made in UK”
- The UK subsidiary has received a high volume annual order of Hemato-Oncology assays from a very reputed lab in UK.
- The UK subsidiary is in discussion with various EU distributors as well to expand the reach in the yet untapped countries across Europe
Big Research and development to yield fruitfulness in years to come
- Our Rapid Kit manufacturing plant is ready & we are optimizing the products in R&D which have market potential, other than COVID Testing Kits.
The Need: As per WHO, AMR remains one of the top 10 global public health threats facing humanity, associated with the deaths of 4.95 million people in 2019. AMR is also a threat to the global economy, with impact on international trade, heath care costs and productivity predicted. If no action is taken, AMR would cost the world’s economy USD 100 trillion by 2050.
The Solution: We are pleased to inform that we have successfully completed the collaborative R&D of the Rapid Tests for Anti-Microbial Resistance (AMR). Soon after the necessary regulatory approvals, we shall be launching below products to cater to the above AMR segment:
- Will be launching our NGS based “TRUNGS®️ Solid Tumor Panel” for Cancer Diagnosis and clinical management in the “European Society for Human Genetics (ESHG)” Conference that will be held in Glasgow, Scotland between 10th June – 13th June 2023
- Amalgamation matter is in final stages and we hope that the process will be completed soon. Scheme of Amalgamation
- Proposed Listing on National Stock Exchange
- M&A valuations globally have gone high due to demand from molecular diagnostic companies which are flushed with cash from COVID. 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 FY23/24 post merger, if we are unable to secure a desired acquisition candidate
- Looking at the valuation company has 155 cr cash in hand which they are proposing for utilisation against MNA deal
- Current enterprise value 158 cr against which company achieving profit after tax of 26 cr.
- Unlisted space for such molecular company is trading at much higher valuation compare to kilpest.
- A company growing at 30% YOY from last 5 years and having a NPAT margin of 50 % is available at pe of 12. Lot of room for valuation growth once the above the things start to materialise.
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In my view, this a good news for PCR-based diagnostics. Mammoth Biosciences was a front-runner in CRIPSR-based diagnostics.
Disc.: invested in Kilpest
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Agree, they have history of working capital cycles exceeding 200days starting 2018. Fingers crossed, anticipate that this year 1st quarter will see full blown numbers to add from Manchester to their top line. Interesting to observe though
From what I understand demerging process is a lengthy process, Regulation#51 applies here.
Seven Canyons Advisors, US based Institutional Fund is showing interest in Kilpest.
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They have been investors previously too I recall.
The management needs to move on the merger and NSE listing! These are the two main triggers for discovery.
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There is no update on June 23rd NCLT hearing yet. I guess it fell through again.
Disc.: invested and waiting patiently
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Guess the same, hope I am proved wrong, if the verdict was positive they would have atleast informed the news about the positive verdict and might have later submitted the judgement document which takes a few days to get uploaded!
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The order is reserved → June 23rd Order. so only the final verdict is pending.
Also one recent transaction in the same space:
Zydus Lifesciences has acquired 6.5% stake in Mylab. They have paid 106 crores for the transaction ref → zydus acquisition
Turn over of Mylab :
- For the year ended March 31, 2021: Rs. 825 Crore
- For the year ended March 31, 2022: Rs. 260 Crore
- For the year ended March 31, 2023: Rs. 95 Crore
This transaction translates to 17x times P/S.
Disc: Invested.
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I did a comparison between the 2022 vs 2023 product catalogues:
- They have added some 4-5 new tests under Oncology biomarkers
- Couple of more tests under ID for Gastro
- NGS based tests are new in 2023
2022 vs 2023 catalogue.pdf (894.3 KB)
Disc.: invested
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I looked at the shareholding patterns for the last 8 quarters; some insights:
- I looked at just the public shareholding
- There is a steady decrease both in the number of “small” shareholders (from ~16K to 12K) and their combined holding; their holding redistributed to “large” shareholders and FPIs
- Large shareholders have increased by 40% in this period (from 15 to 21) and their combined holding has gone up by ~3.2 pp
- Looks like the same three FPIs have been invested and are increasing their holding, particularly Ark Global
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I’ve been reading this excellent book “The Age of Scientific Wellness: Why the Future of Medicine Is Personalized, Predictive, Data-Rich, and in Your Hands.”; the chapter on cancer talks about something called “Galleri test” – this test sounds like a very innovative approach for cancer screening, and can potentially disrupt PCR-based tests:
I talked to someone who works in the diagnostics space and he said: Galleri test is based on detection of cfDNA, a method which is already being used in monitoring of organ transplants. While the technology is very innovative, the relative lack of specificity in predicting organ involved limits its widespread use. The cost is also a concern (at least in India). It needs more refinement and cost rationalization for widespread adoption.
Disc.; invested
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The NCLT amalgamation case status is shown as disposed but could not find the copy of final order there.
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Could you please let us know how to access this through NCLT website. Thanks
It usually takes couple of days after status change for the updated order to upload.
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