Prevest Denpro Limited

Prevest DenPro Limited is one of a small manufacturer of dental materials [0.5% market share as per company] serving the global dental market with a wide range of high-quality dental materials used for diagnosis, prevention and treatment of dental conditions as well as improving the aesthetics of human smile. The Company manufactures over 100 dental products which find application in endodontics, prosthodontics, orthodontics, periodontics, restorative dentistry, aesthetics dentistry, and for fabrication of prostheses in dental laboratories. The company exports its products to more than 75 countries worldwide.

The key players for dental material market in India are Dentsply Sirona Inc. which holds a share of 21.8%, followed by Envista Holdings Corporation (17.6%), 3M Company (8.0%) and other players holds a share of 52.7% in the market which inter-alia includes Kavo Kerr (16.7%), Biohorizons IPH, Inc (6.9%), Shofu Inc (5.8%), Zimmer Biomet Holdings,Inc.(4%), Avinent Science and Technology(2.8%) and Prevest Denpro Ltd (0.5%). [Investor presentation by company].

The company was listed recently in BSE SME exchange, with lot size of 1600. The IPO was at rate of Rs. 84 in September 2021. Presently the company is trading at around 230, commanding a market cap of 270 crores.

Financials of the company is available in the following pic:-

In H1-2022, the company has achieved a revenue of 17 crores with net profit of 5.3 crores.

Thesis of investment:

  1. India is a vast market, expected to grow at fast pace [10%]. Some studies suggest that dentistry market in India is likely to grow at very high rate of 20-30%.

  2. This product market is dominated by MNCs, in which the company has created a niche for itself. The company’s financials, operating margin and ROE shows that the product is well accepted in the market.

  3. The business consists of hundreds of products, having small revenue each. This itself creates a moat and restrict competition.

The company is getting its product approved in USA market. Some of the products have already been approved, and some are awaiting approval.

  1. In the last five years, revenue has grown at the rate of 20.8%, whereas EBITDA has grown at the rate of 46%. It is possible that margin may increase further with scaling of business.

The management is targeting 500 crores topline in next 10 years, which looks achievable.

  1. Valuation, though not cheap, looks attractive in the light of growth expectation.

Risk:

  1. Micro cap investment may result in loss of 100% capital.

[Disclosure- Invested]

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Thanks for a detailed account of the company background. I have been tracking this company for sometime. Few items which I am yet to understand -

  1. I am yet to find a clear answer from the company on - How does it plan to outgrow its peer? Like you have mentioned - it has a market share of 0.5% and a turn over of 27 crore to 500 crore in 10 years is a very robust challenge. However more practical/concrete details are yet to be seen. If the industry is growing at 10% and you intend to grow at 33%, then that requires serious plan and execution.

  2. They have a huge spread of product - Clinical Product and laboratory-products. Yet to understand which is their top category product (breakup) and which product do they have in mind - which would take them to 500 crore

Overall though I see that this is an unique company (not many company in the listed space with this product portfolio), we also must have a higher degree of skepticism about future projections from such companies.

Disc : Not invested, Just tracking. Not an advice to buy/hold/sell. Not a registered advisor.

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The KMP remuneration is very very high compared to the PAT… Please consider this aspect as well.

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Very correct.
As per their investor presentation, they are working on 80% of the capacity. Further, new manufacturing capacity is coming up. They are also adding new products. Further, there is a huge price difference between quality imported products and their products. Their topline has grown @20% for last many years, thus we can expect similar trajectory going in future. Moreover, they have a very small market share which may help them in maintaining higher than industry growth in the foreseeable future.
On Amazon they are claiming- “Wide range, globally acclaimed, affordable price”.
If they can offer quality products at an affordable price, they can grow at a higher pace.

@rk1771 Thanks for the detailed write up. Interesting business. Share capital is now 12 crores. When will it get migrated to main board? Is 2 year listing criteria on BSE SME exchange still applies for migration to main board.

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Thanks @rk1771 for posting this company details. Just curious how come this company posted higher revenues and bottom line in FY 21 when the whole world was struggling with lockdowns etc. Any views?

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According to Mr. Atul Modi, when India was going through the second wave, other countries were doing relatively well and compensated for the loss of sales in India and vice versa.

Watch from 6:00

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The company is conducting Concall tomorrow at 4 PM
Access-number.pdf (92.9 KB)

https://registration.dsnl.in/2021/Prevest/index.php

Link for pre-registration

In the entry place of mobile number… Just enter yr 10 digit mobile numer. No prefix.
Instruction there seems to be confusing and gives error if not entered as above

Thank you for highlighting the company. In the listed space, its one of a kind. I have two issues:

  1. Based on the current earnings the stock price looks over valued and looks like that it has already reached a peak from its listing price of 84 to 315. It looks like a high risk affair considering the small size of company.
  2. They have been operating from J&K and from the interview it seems that they don’t plan to have any manufacturing facility elsewhere anytime soon. They have 100+ products and they surely can win with this . However, for this they need a larger scale of operation and larger spread of manufacturing facilities. Currently they are at ease working from J&K and from the tone of Mr. Atul Modi, it seems that they wont be setting up any more plant anytime soon in India for atleast in the next 2 yrs. So, shall we invest here when it seems that the share price has already discounted the future factor in the current setup?
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Their products are available to order online
Their Product Catalogue
Spoke to a Dentist Friend in UK, these products are available on Amazon UK and India as well (Ratings are decent Averagae of 4* )
Just spoke to a freind who is dentist in India and he said he never heard of this brand, the brand that they use (dental cement ) is almost 130% more pricier than Prevest product.
Low base company , need to to do lot of scuttlebutt to understand the quality of the product
Whoever is attending tomorrows call please post the notes here

I am trying to compile list of products that they offer and then do a market research and find out the quality and pricing .

They have to give the quality at the reasonable price to succeed .

I have few details about their peers products will compile them and post soon.

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Interview post listing.

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Yes.
Just looked at the price of resin dental cement from an American co. and their biggest competitor Kerr (Envista Holding), it cost approx 3000rs whereas Prevest supplies for 1250rs.

What I have observed is that all of Prevest’s competitors, such as 3M, Envista, etc., are majorly dental equipment manufacturers, and selling dental materials is a very small part of the revenue, what I assume is that quality dental equipment provides for the opportunity to cross-sell dental materials.
Might be wrong.

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The company has done Rs. 4.49 eps in H1-2022. We can expect Rs. 10-11 eps for FY 2022. Thus in p/e ratio at the current price is around 22 based on forward earning; not very pricey in a raging bull market. Still the risk remains as it is a less understood company in the microcap category.

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The scrip is still in SME board the price movement is mostly due to retail demand. If anyone joining the call tomorrow please ask when are they moving to main board.

Since the stock is on SME board the one has to buy in lots.

Rules to move to main board, I think it qualifies , please correct if I am wrong

Couple of clarifications which I have understood from the Prospectus and multiple con calls -

  1. Co. has completed the infra for the new plant where they would be producing Gels, Sanitizers, and other couple of consumables and some part of IPO money will go into buying equipment and lab equipment
  2. They have also recently received FDA approval for couple of their products which will now get them entry into Canada and USA market which are the biggest markets for dental products
  3. Considering COVID now slowing down, expect more dental procedures to come and thus more sales for the company
  4. I have enquired with couple of my friends who are into this segment/sector and they say that there are great margins to earn in this business since all the imports are too costly to sustain

Discl. - Invested

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I am a dentist practicing since 13 years. Most other dentists including me(barely) use prevest products for non critical things. Its cheaper but it shows in quality(bad strength, consistency, handling). There are other similar companies and products available( rebranded china imports). One thing they do seem to do more than other cheap competitors is better brand presence in conferences and shows. Hope it helps. Not invested.

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As per the rules in the link provided by you, company has to be listed for minimum 2 years on SME board before they can apply to move to main board. Since they got listed on 27th Sept 21, its too early for them to think about main board move.

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Sir , Do you use any product of prevest ? i don’t know if there is anything on clinical side that they offer.

Because they got FDA approval i assume it must of good quality.