Why is the profitability so high? Are there inherent advantages in operating with these non-critical, essentially commodity like products?
Answer : healthcare products are marked up by 100x to 1000x by companies from raw material cost small pond size not much competition huge regulations
And If there is no competitive edge, won’t this lead to a price war in future?
Answer : it’s India one of the cheapest dental care services in the world ,where in the world would you be able to get a cleaning or fillings less than 1000 rupees (it includes doctor fee+material +anesthesia and everything else unlike hospitals where you get billed for materials seperately)there is always a price war but there is competitive edge as long as you gain brand loyalty and usable products .we tend to buy already used products and brands because we know how they behave ,if the prices are similar or even if it is little higher than other brands .other part of of equation is dealers network if I call my regular dealer lot of times iam given much less options than online or two three days delay if i insist on specific brands .all dealers try to push thier higher margin products always readily available .online buying is headache even though 10 percent cheaper takes two weeks for delivery , cancellations of some products, multiple deliveries , missing shipments so most buying is offline from trusted dealers which takes a call or whatsapp and delivery same or next day and most dealers have tie up with companies and each other and ofcourse credit facility .
Even the brands created by online ecommerce players are trying to gain offline share as well but we know those are chineese knockoffs and don’t trust them that’s a plus to prevest ,not many people know this brand probably in India as expos are halted due to pandemic .banglore and Chennai expos used to be huge with thousands of cars and doctors buying two suitcases worth of materials as they can check various products physically and buy on spot
I think that explains the third question as well
First mover and home turf are not a factor ,it’s trust and reasonable pricing in India once they gain trust as branded company like 3M or GC ,people tend to to stick to known brands as long as price is reasonable .these companies last decades if they play the game properly
I have no idea about management or bussiness part of this and why they had to list so early and why they have only 550 shareholders and no marketing people visiting clinics like every other brand or giving samples with large purchases to gain market share and only working through dealers .may be give a call to company
Results for the March Qrtr is out and are good. They have been consistent. Cost of borrowing seems to have been reduced. WIP is massive. Growth CAPEX>>>>Maintenance CAPEX any day. They have not however grown quarterly, but grown beautifully on an YoY and HoH basis. It would be interesting to attend the concall on 19th May 2022. Overall, satisfied with the results as consistency is the key to long term wealth.
Have some concerns/questions; Don’t think the statements reflect a bright picture; feel free to correct me
Capex WIP FY22 → 4.72 cr as on BS. Half yearly Sep, FY22 was ~1 cr.
Funds raised from IPO ~ 42 cr. All of this 42 cr is getting reflected currently in cash and cash equivalents. What is the company doing with this cash?
Announced capex from Q3 concall was around 16-18 cr. This includes 8 cr R&D expenses. Supposed to come online by Q1 and fully operational by Q2 FY23. Are they in time or are we been thrown rosy timelines and numbers? There should have been heavy capex spending in Q4 for the announced timelines to make sense.
Inventory of 3.26 cr on books → This is almost 2 cr higher than last year inventory. Why is this not getting sold?
In the Q3 concall, they mentioned that they are getting traction from saudi arabia & few more markets. Why hasn’t this reflected in Q4 sales. They did guide for FY22 sales to be ~40 cr and we are at 38 cr, but I would certainly be more confident with a management that gives conservative estimates and then outperforms rather than the other way around.
Went through amazon.com reviews and none of the products (out of <10 listed) had any significant reviews or ratings. Is this likely to change in future? How? What efforts are being made on marketing & distribution → Are the required levers in place - for e.g. hiring the right personnel
Margins are down - why? company was very prompt in Q3 about communicating that they have moved to high value products and will continue to do so in future → then why do we see this drop? - Is it a temporary thing due to commodity/RM inflation? Are they able to maintain prices/realizations?
Capacity utilization as per Q3 concall was 85%. There is room for some topline growth even without capex. How is this progressing? Most likely not getting reflected in Q4 results
USFDA approval → they had applied for 15 products on top of 5 approvals already received by Q3. Of these 15, I guess, few were recently announced - dental cavity liners. How many products do these constitute? Plan was to go to customers with a basket of 20 (15+5) within 2 months. How many are pending approvals, and has the timeline shifted?
Mgmt said it would give updates on rewarding shareholder by end of FY. We are there…
Please pitch in and add your questions so that we may have a good discussion on 19th (concall).
Original document from FDA which would provide a more detailed information on the product performance compared to peers. Also here you can learn about USFDA 510(K) and its meaning for the certification.
Pastures always look green on other side (emerging markets or outside of India)
Indian domestic market is so big, you talk to any Dentist they say the cost of material is very low in the treatment so they prefer Japanese or German brands. Why are they not focusing on import substitution ?
I still feel their main customers are dental colleges which are very price conscious, no finer details are shared ( correct me if anyone has these details) who are the their top customers (Is it Doctors ? ) What is the MR strength on the field ? What is the revenue generated per MR (this is very standard metric used in this field )
Production capacity is not a bottleneck for the company. If the orders increase beyond the current production capacity of existing products, they have the option to increase #shifts and sustain for next few years
Marketing strategy - company will be attending exhibitions in export markets
Mgmt bullish on 4x sales in 4 years timeframe
Impact of war tensions for 1 month in Q4 on order fulfillment; delayed to Q1 FY23
Profitability will restore as price hikes happened in Q1 FY23; RM cost cooling off; 30% RM imported from NA/EU and some packaging materials from china; rest is sourced locally
$1M (7.5cr) sales guidance from Saudi Arabia market; 10% growth to topline expected from US/Canada markets in FY23
USFDA approval in place for 9 products (5+4)
Came out of the concall with a buzz in my ear. Mr. Modi kept harping about how confident he is about future growth. Detailed explanations were not provided when asked about plan of action or strategy.
Planning to write a mail to investor relations by weekend seeking deeper answers. Included questions from Shiva & Rafi. Please add your questions to the list:
Q4 FY22 dip in revenue - Why did it happen? Which countries in EU got impacted? Why were the orders delayed when they operate on both LC & 100% advance payment mechanism?
Topline drivers - How will they drive the 4x in 4 years guidance?
Products - Top products by Geo and trade channels & their contributions? Strategy for products that are not doing well?
Distribution/Sales - Who do they sell to? Top customers, distributors, hospitals, clinics, ecomm channels etc.? - What are they doing to increase frequency and reach? What is the contribution of different trade channels? How will they take care of stocking/destocking issues (a leaf out of LL’s page)? What is the size of Sales (MR) team? What is the revenue generated per MR? Is there a separate sales team to market high value items such as composites and cements, given this market is crowded by 3M, Ivoclar, GC, Tokuyama etc.?
Marketing - How do they plan to beat MNC competition and acquire new customers? How much are they spending? Which marketing channels and spend mix?
Vision of the promoters?
Why was the capex timeline shifted? Why is there still 42 cr on balance sheet? What do they plan to do with it? What about rewarding the shareholders?
What is the progress on refurbishing the existing plant? If its done, has the utilization gone up in Q4? If not, what is the target utilization from the plant? By when can we expect that to come online?
Great efforts Vaibhav. Attended concall. Management says sales will increase in 4-5 years to come. They have to give a concrete timeline. Please update us when you send/get the answers. Thank you.
I also attended the call. However, due to time constraint my questions were not taken up.
Lockdown has eased and with the reopening theme, we expect the dentistry profession to be back on track with increased patient footfalls. However, we see that there is a huge rise in Inventory left. So, is the marketing strategy employed by the company being successful to convert customer? Or, is it quality issues that doctors are refraining to buy the products despite the marketing efforts and despite their products being cheaper?
The company boasts a vast product line in the the Dental category. This as such can be considered as an overdiversification of dental products though on the same field. As such , does the company feel that this overdiversification is making them lose focus on promoting their killer products and as such these winner products might not been getting the marketing efforts they deserve. When it is a well established fact that the top 10 products contribute 20-22% of revenue, they why does it not focus more on them and gradually expand their product line.
As in the previous concalls it was promised that the shareholders will be rewarded by the end of the FY21-22, can we expect some sort of announcement in the coming weeks regarding bonus or other corporate action.
I could add in few more questions (attending last 30 min of the concall - hence please excuse if the questions are repetitive to ones asked in concall).
On one hand management speaks about currently executing 1~1.5 shifts based on demand; But can easily stretch it to 2~2.5 shifts per day. Also there is a brown field expansion (along with R&D center being set-up). Now what is the need for this brown field expansion? Are these for new product line set-up? Because in-case it is for existing product line - then current capacity looks to be already under utilized.
Management speaks about reaching the distribution to Tier 2 and Tier 3 cities. That is a vast region under consideration. By their own admission - because of capital and capacity constrains they are restricting in budget of the marketing and sales. So these two statements are on opposite end of the spectrum. What is the model used for marketing and sales? What is the strategy to reach Tier - 2 and Tier 3 cities and How many of say Tier-2 and Tier-3 cities are you targeting? I this some concrete vision/plan is missing.
Opinion :
Felt like management overpromises and under delivers. They need to come clean on what is realistically achievable. Stakeholders would appreciate this much better than over promising and under delivering.
Any shareholder with considerable experience - knowns companies will face non linear, delayed outcome of the execution. Instead of high pitched sales on the concall about growth - if they can layout some degree of concrete plan - company can gain good traction from investing community.
I am not trying paint anything bad about the management team effort and these comments does not in any sense try to project the company in a negative light. However, I find it difficult to read the mind of the management in a transparent manner due to above 2 issues in communication.
Is there over-promise by the promoters? I don’t think so. Management has delivered, except for muted growth in Q4, 2022. The reasons have been explained in concall-
“Orders were there we did not execute the orders because of the payments, as a company policy we will execute the order only on 100% advance payment. So, we had the orders but there were some sanctions and some banks who were dealing with Russia for that reason they could not send the payments before 31st March and that is why in the last quarter our sale was impacted. But finally, those orders were rolled out to April and executed in the way looking for payment.”
Unquote.
Domestic dental market is growing at 20-30%. They have started exporting to Saudi Arabia and expect orders worth a million dollars. USFDA approval is in place and they are hopeful in US/Canada market. They expect around 150 crores topline in 4-5 years, 4 times in next 4-5 years. Ambitious, but achievable. If ine can get 20% growth on existing domestic market as the market is growing, and add 10% through new export destinations, the target is achievable.
Figures of 20-30% growth may look overstretched, but it is very much achievable on a small base. In fact the management is achieving that for last many years. In the last five years, revenue has grown 22% CAGR, whereas EBITDA has grown at the rate of 45% CAGR; with all covid related disruptions.
Earlier management stated that they are targetting 500 crores topline in next 10 years, which in my view is a possibility.
[Invested and biased]
I came across this company few days back and was researching about it. I checked with one of my friends in an export data co. and he said that Prevest export volumes are very very tiny. They export only to a max 6-7 countries with very limited total turnover. It seems very optimistic that the co. is claiming to export to 80+ countries with just 40 cr roughly of topline and 25 cr coming from export market.
I am not saying that the co is giving out wrong info but just that we have only co’s word to believe on the domestic/ export split and believe those nos to be right. what if the nos are inflated and actual topline is only few crores??
Has anyone verified with mgmt about their biggest markets/customers?
Why not spend some time in understanding what the co does ? Just need to listen to 1 concall:
Their business model is distributor lead. Most likely they export to distributor who exports to onwards countries. They have large distributors in Dubai & Germany
After current capex co does not have to do any capex for next 4-5 year growth. That is importance of this capex
Why not do 3 shifts? While it leads to better asset turns it does cause problems of overutilization of the machinery & can lead to wear & tear & faster breakdown than what normal depreciation accounts for. Anyway this is not a capex heavy biz, so getting fresh machines actually seems like a conservative execution plan
Tier 2/3 is large field which is why co has done a large capex. They are essentially breaking a mnc monopoly so it will take time & effort but execution is quite visible on ground
I personally think it’s great to look for red flags & be skeptical but beyond a point we have to find what to make our peace with. Prevest actually has one of best industry structure, growth execution, TAM that i have seen.
I do agree that management can potentially give some extra guidance on execution plan which i am sure we can ask in subsequent concalls
As of right now execution strategy seems to be to bag a few large distributors & grow with their help. This does work btw. Look at tarsons. Similar kind of a push model.
There is 1 aspect of prevest which is underappreciated on the thread i think: they are actually expanding the TAM for dental treatment. Imagine that at some point a treatement is only available to rich people who can afford a 20k dental implant. Now prevest products enable a 6k dental implant. That has actually expanded the demand set. So in that sense i think they are actually unlocking latent demand & thus adding value to the dental economy.
The growth guidance is difficult but not much higher than whatthey have anyway done in last 2-3 years. My scuttlebutt tells me that while prevest product might be 30% inferior to mnc product but being 66% cheaper it adds more value to the customer (those that are poor just cannot afford the mnc product)
20-25% capacity utilisation increments for new capacity each year for next 5 years. Sounds doable
Came across this company previous Friday or so. Started studying since then, at the surface level it looks good.
For a company of this size, they are very much matured when it comes to documentation. They have maintained annual reports since 6\7 odd years, conduct concalls along with the presentation. Even though annual reports doesn’t talk about them or the business strategy which might get improved down the line. Impressed with the regulatory approvals as well as the accreditation they have got. They have maintained domestic as well as international distributor list in their website. Good to see having their own shopping website. Advisor list is impressive too.
Impressed with their Sales as well as Profit number. Even though remuneration looks on the higher side as a percentage of profit. But when we look it from profit growth vs salary growth, its conservative as salary has hardly grown by 2.5 times vs profit growth of 10 times. For their caliber and experience they would definitely get better salary outside.
What worries me is their growth since their inception. Clocking just 28 cr even after 2 decades. I presume they were busy with developing the products and setting the field. I think their inflection starts now.
Did a sort of scuttlebutt, checked with dentist who had experience in Middle East, she is not making use of their product.
Checked with another doctor, she isn’t aware of the company name itself. With .5% marketshare i don’t think many of the doctors will be not aware of them especially from the tier 2/3 cities.
Checked also with couple of distributors of tier 2\3 cities, one was hardly selling couple of products of them and another guy said with the price they are quoting, their products are good but not comparable to MNCs like 3M of the world.
Checked their products on the amazon, they have decent rating
Atul Modis LinkedIn profile looks decent with the posts as well as the traction & followers he has got
Things to watch out
Is Management minority shareholder friendly. Above thread doesn’t give good picture.
Will the management walk the talk. They do with their number. But looking at the dividend talk need to give them some more time as they are still in the growing phase.
If they walk the talk just like in the past with product diversification, we have huge TAM to address
Thinking to take small exposure. Would have taken if there wasn’t a restriction on the lot
