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TheAsianInvestor    


Mumbai, India

As a long-term investor, I focus on undervalued stocks having potential to generate market-beating returns. Focus is entirely on multi-bagger stocks that are being categorized as small-cap or mid-cap.

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Contributor since: 2022

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Comments: 0 | Likes: 0 | Current Price: ₹ 1300.55


What factors are likely to support Beta Drugs Limited? Let's explore!

Oncology market in India continues to grow at better rate than overall pharma industry growth.
Since cancer is 2nd largest cause of death in India, Indian market appears to be characterized by huge demand for cancer drugs.


Beta Drugs Limited

Beta drugs limited (formerly known as Adley group) manufacturers widest range of anti-cancer drugs in India. The company understands that each and every moment of life is precious mainly for cancer patients. The company has been categorised as one of fastest growing company in Oncology product segment, contributing to significant rise in profitability of Beta drugs limited.

Business model of Beta drugs limited

Beta drugs limited has a dedicated team of scientists who work for product development which helps in treating diseases and providing better patient compliance such as dose flexibility, easier administration, high safety and efficacy. The company develops in-house API and formulation. This supports in reducing cost of expensive medicine. This has accelerated access to low-cost generic cancer medicine to the company’s patients.

Beta Drugs Limited has state-of-art manufacturing facility which is situated in Nandpur, Lodhimajra Road Solan, Himachal Pradesh, India. It is a pharmaceutical formulation manufacturing company which is engaged in developing, manufacturing and marketing of drug products. These products are for domestic and international customers. The company’s products range spans from anti-cancer tablets, capsules, injections to lyophilized injections.

Track record of management

Rahul Batra

He is Chairman cum Managing Director of Beta drugs limited. He has a Master of Science degree in Business and Management from University Strathclyde Scotland. He is engaged in managing marketing and sales segment of the company.

Varun Batra

Varun Batra is Joint Managing Director of the company and has degree in Business Management from Toronto Canada. He is responsible for monitoring production department and export sales of the company.

Balwant Singh

Balwant Singh is Director of the company and holds degree in PGDPM-HR & IR from DAV College of Management, Chandigarh. His experience spans across 19 years and covers field of pharmaceuticals. He manages all affairs of the company.

Ashutosh Shukla

Ashutosh Shukla is the company’s Director of Sales & Marketing and oversees domestic and international market. He has done an executive MBA degree from Symbiosis International University, Pune. His experience spans across over 20 years of sales & marketing in renowned pharmaceutical companies.

Financial performance of Beta Drugs Limited

Consolidated revenues from operations of Beta Drugs Limited for FY23 saw a growth of 24% to INR227.11 crores from INR183.84 crores in same period of prior year. Growth was led by 31% increase in exports and 24% increase in Own Brand sales, with sales to third parties increasing 65%. EBITDA of the company (excluding Derma impact) went up by 28% to INR55.92 crores from INR43.7 crores in year-ago period, with EBITDA margin expanding to 25.04% from 23.8%.

This improvement in EBITDA was led by higher sales of branded products and exports and positive impact of backward integration. However, if we consider impact on Derma’s business, consolidated EBITA came in at INR53.88 crores. Consolidated net profit of the company too grew 24% to INR30.72 crores from INR24.8 crores in comparison to similar period of previous year. The company enjoys net debt free position, and was over 3 crores cash positive for FY23.

Despite tough conditions in FY22, the company responded with alacrity and exhibited resilience in dealing with difficult operating environment. While entire world saw chaos and disruption, the company delivered highest annual growth ever. FY22 revenues of Beta Drugs Limited grew 58% to INR183.84 crores with consolidated EBITDA increasing 72% to INR43.5 crores from INR25.24 crores in comparison to year-ago period. EBITDA margins saw expansion to 23.6% from 21.7% and its net profit went up by 112% to INR24.8 crores from INR11.7 crores compared with same period a year ago.

The company’s results were supported by its strong position in Indian market with over 112 SKUs and its products can be accessed throughout major Corporate & Govt hospitals. It continues to onboard new hospitals on monthly basis and its focus is on expanding branded product portfolio in existing hospitals too.

Future prospects of Beta Drugs Limited

Beta Drugs Limited is all set to see strong growth over next few years and this growth is expected to stem from strong R&D efforts to establish complex generics in oncology space and sustained expansion into new geographies. It continues to file new product registrations throughout ROW countries and it plans to enter regulated markets soon.

The company projects that with strong tailwinds and momentum throughout all segments: Own Brands, Exports, APl, CDMO & Derma, Beta Drugs Limited should see strong growth for upcoming years. The company has now been categorised as top 10 players in cytotoxic Oncology space and targets to be among top 5 players over course of next 3 years. The company anticipates revenues to double over upcoming 3 years and its EBITDA margins should improve further to be between 25%-26%.

Given recent approvals of ANVISA & INVIMA, the company expects strong sales from exports in next 3 years and it has started registration in several PICS countries. It has expanded production facilities in API & Adley formulations plant and has added one more line in API (focused on regulated markets) and another injectable line having 2 new lyophilizers in Adley Formulations plant. The company has expanded its oral block. Domestic market is expected to be catered from Adley formulations and Beta plant should be dedicated to regulated markets.

Beta Drugs Limited has strong product pipeline of FTLs, NDDS, PARP inhibitors, and TKls which should get launched over coming months & years. Dermatology division of Beta Drugs Ltd is expected to grow at a good pace and should be EBITDA positive in upcoming 3-4 months.

Industry analysis

Indian pharmaceutical industry continues to grow steadily and evolved into preferred destination for a range of high-value pharma products and APIs for global drug manufacturers. Top notch capabilities and favourable market conditions over past couple years have made sure that India continues to be a profitable pharma market globally. It continues to remain as attractive destination for generic R&D and manufacturing of pharmaceuticals as a result of strong capabilities throughout value chain.

Oncology drugs market should grow at fast clip throughout world mainly because of ageing population and lifestyle changes which make population susceptible to cancer. In India, Oncology drugs market should grow in double digits over next several years to come. Therefore, given Beta Drugs Limited’s market leading position in oncology segment, the company has long runaway ahead both regarding opportunities and growth.

Experts believe that worldwide medicine net market size should be able to compound at 2-5% to touch more than $1 trillion by 2024. Healthcare sector should make up for highest R&D spend over coming few years. In past, surge in healthcare spending stemmed from treatment for chronic diseases and untreatable disorders. In long term, experts believe that market should reward companies investing in their R&D functions and adjust to variations in consumer preferences.

Risk factors

Since pharmaceutical industry is most regulated industry, Beta Drugs Limited has to follow certain protocols to remain operational. It needs to adhere to several government regulations. If there is any change in regulatory norms in India or elsewhere in exporting countries, the company’s business might get impacted.

Apart from this, the company’s industry is highly competitive and increased competition might constrain its scalability. There are certain inherent risks and liabilities which are associated with products and their manufacturing. Prices of critical raw materials (active pharmaceuticals ingredients) are quite fluctuating. Therefore, the company faces risk of variations in commodity prices.

Shareholding pattern of Beta Drugs Limited

Promoters of Beta Drugs Limited continue to hold ~66.73% at end of June 2023 and this holding percentage remained consistent in comparison to March 2023 holding. Mr. Neeraj Batra holds ~65.96% by June 2023 end and his holding has remained same over past couple of quarters. This means that he is optimistic about the company’s business prospects and outlook.

While FIIs and DIIs make up ~0.29% and ~0.04% respectively of the company’s total shareholding patterns, public shareholders account for ~32.93% by end of June 2023.

Valuation and investment rationale

Stock of Beta Drugs Limited currently trades at ~30.6x, which is at a deep discount of sectoral average of ~38.9x. This exhibits that investors can consider going long on this stock as significant upside is expected in coming few months. This expected growth should be supported by its established presence and diversified clientele and healthy financial risk profile.

During previous 3 years, Beta Drugs Limited increased its focus on building innovative product pipeline in oncology space and has prepared itself to realize significant growth opportunities both domestically and internationally. It has continued to be a preferred supplier of several renowned OEM’s and was successful in expanding approval base. Therefore, it has added leading players from industry. Beta Drugs Limited should continue to be in a position to expand its market reach and increase its market share.

Disclosure:

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.

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