If that is the case, then the subsidiary should have some revenue as the entity in India would sell to subsidiary in Singapore which would in turn sell to the customers. The annual report doesn’t disclose any revenue when discussing this subsidiary.
Disclosure : tracking, not invested
Notes from last concall:
The results are down for 2 back to back quarters. Quarter ending Sept its net sales are down by 6% and in the current result it increased to 13%. Anyone tracking this business? Any guidance will be helpful.
Below are the points I could grasp from going through concall:
I guess last year Q4 was bumper and had covid related revenues so next quarter would also be sluggish after that we could be having base set for whole year and then can get fair bit of idea.
Haven’t gone through the concall, but lot of competition in diagnostic industry should benefit them, as the new entrants and aggressive growers will need more consumables. How come that adds competition to them! Are the new players in the diagnostic industry buying consumables at a cheaper rate from their competitors?
Yes they are buying cheaper from competitors. Tarson didn’t cut prices at the moment and as per them they haven’t lost any market share and this quarter they have done better than their competitors.
They are tracking this and will come up with different strategy if any significant impact being seen.
Tarsons products detailed analysis
https://drive.google.com/file/d/1jlTGUT48ot7XQtywGVEr0N7ADn_E5wqr/view?usp=drivesdk
Hope these will helpful to you
Before penning my thoughts on further interactions , I wanted to speak to the supply chain partner. Finally spoke to him over this weekend. I also spoke to the competitor of Tarsons (prior to Q3 results). I wanted to understand how is the space shaping up, concerns around macros etc.
Interaction with the competitor.
Their Q1 and Q2 were optically weak due to high base last 2 quarters but overall non covid is growing at 20-25% for us.
Over-capacities happened due to Covid and opportunistic manufacturers got in masks santizers and some products of our industry. Because demand was ot peak, everybody made money. When market went down, capacities there they went desperate to sell and it spoiled the market.
I do expect next 4 quarters crappy stuff goes out of the supply chain.
Tarsons had covid in the base more than us. Hence they went into PCR/Cell Culture since demand from diagnostics reduced since they also stocked during covid.
Q1, Q2, Q3 : If anyone had a flat line one should be happy. Growth of 10% is thrilled and even 10% de-growth, one should be happy.
Glass to plastic is a pretty old narrative, the transformation of users from glass to plastic, wherever its possible 95% is done.
Tarsons growth triggers : keep a track of diversification. They are too dependent on India, has own advantage and disadvantage. Capture more opportunities across and outside. Product range ; it has dependance on few SKUs although has wide SKUs.
20-25% growrh rate possible for us and tarsons.
1700 skus is true for tarsons. We have 1100 skus.
We have late 30% margins Tarsons can sustain these margins or upper 40%s
Abdos as a competitor : There is no competition from it, lot of white noise.
They have the firepower no doubt. They have seen their sales fall a lot post covid. Shows the impact of covid had on industry (from 100 to 35 crores)
Customers prefer companies which can offer SKUs.
Chinese competition is very relevant
China plus 1 is relevant even for us.
Sales and marketing costs : What we do is go to international road shows. Reiterate our brand image. We keep participating and business starts coming in and difficult to correlate which exhibitions get business.
Going forward these costs not play big role as we scale.
Few listed global peers, have also seen slowdown FY numbers have been published, one can see their slowdown exceeds our slowdown.
Lot of distributors have inventory levels which they cant sell.
Overall industry is not looking great but rebound is around the corner. We are doing amongst the best performance india vs international, small than us and Larger than us.
Approximately 30,000 crores is our target market globally (including our new products).
India market is 1200 crores.
We have added few distribution accounts globally. We change distribution if products not doing well.
Interaction with the supply chain partner :
This March should be flattish to slight +ve YoY distributors will meet their year end targets. Then off take in April will be low, since over stuff in March, unless demand significantly recovers in coming quarters.
Overall confident on the industry.
20% growth achievable YoY for the distributors.
Covid base was so high, if they close flat is achievement.
They might have lost some share in diagnostics (he was not sure, hence can ignore)
Tarsons PETG replacing Nalgene.
24lacs months PETG sales in Reliance life science. Half sale converted to tarsons.
Process : Sampling > quality > Approve> Pricing lower.
12lac month (1.4 crore) Reliance Lifesciencies.
3-5% Price rise.
How will distributors achieve 20% growth. FY24 : FY23 sales +5%(Price)+5-7%(New products)+ 10% organic growth. = 20% growth.
New products need to work anyhow for tarsons to achieve their guidance.
1-2 PETG and Pasture Pippet (own manufacture, better margin earlier imported.
PCR didn’t pick up in few regions and it is doing well in north.
Sales team hired new folks to push PCR line, door to door.
They are also Heavily investing in instruments, which are imported, study and then launch.
Brazil, Argentine, Latin America, Russian : hit them hard in exports.
Disc : Exited with a 6% loss, believe they could push their guidance in coming quarters and this could derail the FV to 450(as per my model). Just my thoughts could be wrong on the exit decision. Using the recent correction to invest in other names where earnings visibility is more clear.
if we compare q4 fy23 vs q4 fy 22, revenue remained flat. q4 fy22, also seems not having covid related revenue, moreover EBIDTA margin also came down. How do you see the result?
Management usually guides for 45% as sustainable.
Also over the past year, costs have increased but sales have gone down, -ve operating leverage.
Results overall in line with what i shared in my above note.
I believe even management said, 500 crores guidance they will review at the end of FY24, on earlier calls rohan used to sound confident and now there has been complete change in his commentary.
CO has been utterly disappointed with the results, as the industry, which is on an upward trajectory, had slight expectations that CO would give some better results. but this has not happened, and with an almost 1000 bps decline in margin, we would definitely see the pressure from the market. I doubt the industry is shaping up and not allowing companies to improve margins. I only hope that the launch of the Panchala facility is a trigger, and I’m not sure how this is materializing now.
The company has ran into problems in construction and commissioning of the Panchala plant. Everything has been delayed by 6 months and the commissioning of the plant will be done at the beginning of Q4FY24, per the released details. Would have appreciated if they had elaborated the ‘unforseen’ circumstances due to which the construction and commissioning has been delayed.
Per technical analysis, the stock is in stage 4 decline. My perception is that it will take a long time to come back in stage 2 growth period, which, prima facie should come on the backs of increased topline and better margins from Panchla plant.
TARSONS Q1 FY24 RESULT & CONCALL
AMTA PLANT- don’t expect cost savings, but we expect operational efficiencies because we need a bigger place to be able to tackle revenues, which are significantly higher than INR 300 crores. 5% to 10% would be the Gamma plant and another 10% would be manufacturing.
Important levers to see an uptick in price is the following two units commercial operations kick in;
in the short term it may impact the ROCE & the EBIT Margins, but in the mid term it would factor as the utilisation keep ramp up.
According to my thesis stock is available at the reasonable price for new entrants!
RESULT Q2FY24 Concall
what is the logic of doing capex of 550 cr having asset turnover of 0.7
Interesting development here.
Tarsons has acquired 100% stake in Nerbe R&D GmbH and Nerbe plus GmbH & Co (German Company in similar line of business, i.e., distribution of plastic labware) for a consideration of ~15 million Euros, roughly 136 Crores INR. (Assuming higher end of band mentioned in disclosure, ie. 10-15 Euros).
This acquisition is done via Tarson’s subsidiary, Tarsons Life Science Pte Ltd. and Nerbe will be a 100% step-down subsidiary of Tarsons after the closure of deal.
Interestingly Nerbe GmbH is a profitable company with 4.9 Million Euros EBITDA and 16 Million Euros of topline in FY 22, earlier years were better in terms of profitability. (Seems a distress acquisition)
Disclosure: Holding.
Acquisition con-call
Globally, Plastic labware market is around 50 thousand crore. Europe is 2nd largest market in plastic labware
Co was evaluating various routes of inorganic growth and this company seemed to meeting the desired objectives
Nerbe - Hamburg based company. 4 decade old entity. Well spread product portfolio. Presence in 30 countries outside Germany. Promoter will continue to run the company.
Acquisition gives Tarsons the gateway to expanding in Europe.
Deal value estimated to be around 10 to 15 million Euro. Milestone based payment. Exact value will be based on FY 24 numbers…
Deal is based on FY 23 Numbers. They felt that it’s the right price and not very cheap…
Will be funded through internal accruals.
Acquisition should be evaluated looking at the synergies and market expansion opportunities, and not just based on EBITDA multiple
While there were questions on dip in FY 22 revenue, management responded that the larger objective was to scale up Tarsons products in the huge European market.
Nerbe’s Inability to scale up - Conservative Family run business. Wanted to remain focused in Europe and did not look to scale up or expand beyond.
Disc: Tracking
