3B Blackbio DX Ltd

When i say that the receivables are high is in terms of sales ratio are as follows from FY16 to FY19(in %) 25, 32, 30, 36. If most of the growth in topline is getting stuck to receivables not a good sign.

Then please check the trade receivables of Cipla or Aurobindo Pharma etc, and see the numbers . It’s 25% or more for most cases.

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I recently exited after Q4 result. I am concerned about the fertilizer business which continues to drag the financials. Receivables are over 12 months in the fertilizer segment. Cipla and Aurobindo are not the right comps for Kilpest. If you consider other small fertiliser companies their receivable cycle is around 3 months. On a 10 year basis they have had no sales growth but profitability has increased significantly which is completely driven by the subsidiary. I don’t feel qualified to verify their diagnostics business which is the only story here. Might relook if 3B Black Bio is carved out and business model proven.

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True. Everyone (at least wild majority) discussing Kilpest nowadays consider only the subsidiary 3BBB [even the starting of this thread itself was based on the subsidiary story]. It will be a hit or miss based on the performance of that subsidiary.

Please check the Capital Employed section for each Line of Business. The real story is only the subsidiary and not the traditional agrochemical business. There is a quantum jump in Capital Employed in 3BBB to 8.25 cr in FY 19 from 4 cr in FY18. Also there is neglible increase in Capital Employed in Agrochemicals business in FY19 compared to FY18.

Promoters buying from market may give confidence boost to retail investors. Out of 35000 shares Lenus offloaded on 22/08/2019, 32000 shares picked by promotors as per BSE disclosures.

Disclosure: invested

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Yes. At 83.9 per share promoter has bought share of 26 lakh around from open market. This shows lot of confidence promoter has in the outlook of future business

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Excellent result posted by Kilpest India. EPS of 3 vs QOQ 1.89 VS 2.04. Balance sheet seems to be stable. Investor presentation gives lot of insights about company future plan.

This is straight 16 quarter were the topline of 3B bio tech rised. Waiting to see response from UK and USA once products are cleared.

Dis-Invested

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I had taken a small position in kilpest and added after results in view of the following:

  • good revenue and profit growth. The profits from the legacy business of pesticide is miniscule and from now onwards the growth in profit should be solely due to the subsidiary.
  • improvement in balance sheet. Significant drop in debt. And cash rich ( 5cr +) on consolidated balance sheet. There is an overhang of around 14 cr receivables stuck with govt of the stand-alone entity, which has to be seen how much time they will need to recover.
  • currently India is having one of the worst crisis of dengue in a decade after the better than expected monsoon. So expectedly their remaining half of the year should be better.
  • candidate for demeger, which if happens will really unlock the potential.
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Efficiency 2010-03 2011-03 2012-03 2013-03 2014-03 2015-03 2016-03 2017-03 2018-03 2019-03 TTM
Days Sales Outstanding 156.78 165.20 183.30 204.67 207.86 254.39 284.52 312.41 241.44 274.14
Days Inventory 92.99 84.22 98.43 124.51 102.30 124.32 128.29 158.54 111.94 145.98
Payables Period 92.08 117.97 145.49 94.62 78.99 192.18 188.74 194.66 113.12 124.65
Cash Conversion Cycle 157.69 131.45 136.25 234.56 231.16 186.53 224.07 276.28 240.26 295.47
Receivables Turnover 2.33 2.21 1.99 1.78 1.76 1.43 1.28 1.17 1.51 1.33
Inventory Turnover 3.93 4.33 3.71 2.93 3.57 2.94 2.85 2.30 3.26 2.50
Fixed Assets Turnover 7.91 6.80 6.02 6.11 6.98 6.39 6.11 5.70 7.32 6.34
Asset Turnover 1.29 1.21 1.00 0.90 0.93 0.77 0.71 0.65 0.83 0.70

All efficiency ratios of this company are not in healthy state.
e.g. Cash Conversion Cycle. This expresses the length of time (in days) that it takes for a company to convert its investments in inventory and other resources into cash flows from sales. In case of Kilpest India, there is increasing trend for this ratio.
Does this not considered as red flag. Or just because sales are increasing, we can ignore the efficiency ratios?

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Could you do this for its subsidiary alone, i mean for 3B Black Bio only. Data can be used for consolidated-standalone results and balance sheet i could do it if you can message me your excel sheet prepared as above.

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Taken data from morningstar website.

See what wonder MDK business is doing for Kilpest:

@ayushmit

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Revisiting Kilpest and 3B Black Bio after reading ARs from Fy-09-10 to 18-19. I have tried to check management’s walk the talk mentioned in ARs. Got some interesting facts. I will summarize major developments, in the process i may have read something wrong or incorrect sorry for that in advance.
AR 09-10
Foray into Bio Tech: Mentioing R&D lab approval from DSIR and initiation of MBD technology. As DSIR approval gave them more money in hand for Research.
AR 10-11
Must read Directors report and very much is covered in starting post of this thread.
AR 11-12
Opened their own Dygnogene Lab for sample testing tested some 1500 samples and Doctors are happy to repeat them. MBD kit segment break even achieved in less than 6 month of operation.
AR 12-13
MBD market is huge earlier mentioned to the tune of 1000 Cr. Mentioned in last ARs that 5 years would be a good time to show results in this segment. Development of kit and Life sciences products are slow process. One need to survive for long term period to reap benefit. Management mentions about capability of 3B Black Bio’s to become dominant player in India. It is worth mentioning that JV works on MBD and Life Sciences. Life Sciences is funded by Gov. In later years company stops talking about Life Sciences research.
AR 13-14
JV scaling up well with new PCR kits introduced on existing customers demand and with increasing customers in coming years your company will become a dominant player in India.
Slow process of new customer addition, free samples, switching suppliers. Started to build Brand.
AR 14-15
JV scaling up well. It’s a bit slow initially as it is a very strongly R&D driven, however JV has made kits- Infectious diseases to Oncology. Which are being accepted by big names customers. JV will become market leader. MBD will improve company’s topline and bottomline.
Though MBD kit business and sector is in nascent stage. Market is dominated by MNC and highly metrocentric. Long term survival is the key to reward.
AR 15-16
JV has made wide range of D.kits from infectious to Oncology, accepted by big names. Sales growth 60%. First time management gives GROWTH guidelines. This trend expected to continue this year too. No major expansion 85% shareholding in JV.Steady growth in infectious diseases but surge in revenue with newly launched tests in Oncology. Infectious diseases are season dependent, Oncology offers a steady growth throughout the year.
This is be noted that management’s comments for their business remains same and changes rarely. It looks like they are sharing their experience. Like this comment is new here "infectious kits have huge competition with MNC and local players whereas Oncology segment is still new and upcoming segment with few serious competition.
Obsereved high growth in Oncology and steady growth in infectious. Launching more kits in Oncology and infectious both.
We are now trusted and preferred business partners with national hospitals and labs. Getting inquiries from overseas confidant of expanding in international market as early as 16-17 .
Hired new talent to increase production. Registration of BRAND TRUPCR.
AR 16-17
JV sales grew 92% but in directors report its written as 60% its an error. Expect to grow with same growth that is 90%+. Declares dividend. Share holding in JV 95+%, subscribed to 427500 shares of 10 Rs. Good growth in asset of JV , this shows that JV is not on paper buts real it is in development mode need investment for growth. Hired new talent for increasing capacity. No international business but hoping for 17-18.
One point is to be mentioned here that Total employee in Kilpest are in decreasing mode and new hiring is going on in JV. Standalone salary expenses are decreasing but consolidated salary expenses are increasing.Management have not taken any salary from JV but from current year they are compensated Rs 50000/- for Nikhil and D. Dube so profitability will take hit from next year.
AR 17-18
Launched 25 assays in last 4 years and also launched kit for Multi Drug Resistance TB Kit. Now see
Management tell you that on increases base growth will not be in 3 digits
however MBD will grow well for few years from now, with new products addition , new customer addition and export. JV would become market leader. MBD grew 142% in sales as per management commentary last year they were expecting this type of growth. Dividend Rs 0.5.
Kilpest India issued 1100000 warrants to non promoters at Rs 85/-. Also 3B Black Bio issued 400000 warrants at Rs 100/- just mentioning that -last year only warrants were issued at Rs 10/- in JV fully subscribed by Kilpest. So 10 times jump in price and that too issued to promoters and non promoters also 300000 to kilpest, 40000+10000 to Dubes and 50000 to some Prateek Goel. JV asset is increasing well with revenue. Dividend declared by 3B Black Bio Rs 4392500/-.
Again new talent hired but decrease in Kilpest’s employee. This year Management is getting Rs 100000 per month a healthy 100% jump now its looks like the management is milking the cow by subscribing warrants in JV and increased salary( which again can be used for buying shares). MBD market 700-800 Cr and growing at 15%.
AR 18-19
As expected by management growth down to 46% in JV and also hints at moderating growth at 25-30%. Lets see what happens this year. Directors write that they have become Market leader in India( i doubt meager 2-3% share make them leader) and then later it also says Would become market leader. No expansion, Kilpest warrants were fully paid and issued shares to subscriber but no mention of 400000 Warrants issued by JV 3B. As per last year AR 18 Dec 2018 is last date of conversion of warrants but nothing is mentioned in this AR. JV asset build is good. JV investment 1.2 crore in Mutual Fund (isnt this strange if u have excess money to invest than why issue Warrants for raising fund).
Hired new talent. JV declares dividend Rs 1/-. Observed high growth in Oncology, Launched H1N1 kit. Expanding to international market doing business in Bangladesh as per Investor presentation. Salaries to the Dubes increased to 1.5 Lac per month +1% of ner profit. Told u so they are milking the cow now. Also bought shares from open market.

I have mostly talked about 3B Black Bio only. Recently company appointed a distributor in UK ,HS Biolabs. Twitter account of HS Bio gives good info about them. Me too talked to Nikhil ji on phone and he told me that they are going to have orders from UK and US market orders are also anticipated in future. They are only 15-20% cheaper than MNC products because of import duty in India. They are supplying to all major Pathology player in India. I requested him to name a few in next Investor Presentation. Expecting to clock only 15 crore as a revenue in JV that would be <40% grwoth YOY. He also mentioned about opening new facility to cater growth when i asked him to mention this in presentation then he told me we want to take all the clearance first. There were so many questioned to be asked but i was not prepared. Some of them are

  1. What is the status of 400000 warrants issued by 3B Black Bio?
  2. Why to invest in Mutual fund?
  3. What is the revenue break up between Molecular Enzyme/ Reagent business and MBD kits?
  4. Why we are not able to increase long term contract ?
  5. Why receivable are making all time high?
  6. What happened to DYGNOGENE?

Discussion is welcome.

Disc: Invested at higher level.

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Huge disruption is coming to diagnostics industry?

Their website well covers their various business segments: Clinical Research Services, Regenerative Medicine, Specialty Pharmaceuticals | Reliance Life Sciences - LifeSciences

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I think it will be positive for the industry and Kilpest can become their partner for Kits. It will be a huge boost to kilpest if it becomes supplier to Reliance life. 3B Black Bio is also servicing the needs of Dhirubhai Ambani Hospital


I am just assuming that it can do it.
Its products are used by LABs. They do not compete with any Diagnostic Lab.

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So, Finally Kilpest Demerging its Molecular Diagnostics business - 3B Blackbio Biotech. This will unlock value for the shareholders.

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Company has informed that the Meeting of Board of Directors of the Company scheduled on February 11,2020 will also consider so till date no demerger has happened
Disc: Not invested This is not any buy sell or hold recommendation

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But his holdings are very much longterm.

Sept 2019 LENUS FINVEST PRIVATE LIMITED 375129

Dec 2019 LENUS FINVEST PRIVATE LIMITED 79186
Dec 2019 SMC GLOBAL SECURITIES LIMITED 296043
total 375229

Again in Jan 2020 All shares shifted to Lenus 375129