Beximco Pharma GDR
India's neighbor is on sale
Beximco Pharma is a Bangladeshi company.
It has a global deposit receipt trading in London, It is very cheap and had growth in the past decade.
However, the current year has seen performance worsen, as the Bangladesh local currency, the Taka crashed, and elevated covid pharmaceutical sales in the previous years.
Can the company still be considered as a long term grower, with positive long term returns in Pounds? We are going to analyse.
Bangladesh is a bordering nation to India, with similar characteristics demographically and economically. It could be an interesting alternative to India investing.
History
The company was founded in 1976 and started producing the drugs formulations of international companies.
In 1983, they launched their own brands.
In 1986, they got listed in Dhaka.
In 2005, they listed in London.
In 2013 and 2016, the company started exports in Europe and the USA.
In 2017 and 2021, they Acquired Nuvista Pharma and Sanofi Bangladesh (renamed Synovia).
(Synovia Pharma has incurred a pre-tax loss of Taka 279.0 million during the post-acquisition nine-month period and thus pulled down the consolidated pre-tax profit growth in percentage terms). The acquisition is going to take advantage of distribution synergies according to the management, by using Beximco’s distribution network. It’s not clear how the acquisition will benefit Beximco as it is currently loss making.
Business
“Beximco Pharma currently produces more than 300 generic medicines which are available in well over 500 different presentations and the broad portfolio encompasses all key therapeutic categories including antibiotics, analgesics, anti-diabetic, respiratory, cardiovascular, central nervous system, dermatology, gastrointestinal etc.”
Its segments are local sales and export sales, the latter being a bit less than 10% of the total.
Net profit is growing nicely (in Taka), but we can see a covid bump in 2020, that leads to stagnation in 2021 and 2022.
This is a common pattern found in other countries as well. Overall, the company has been growing constantly, and the Taka was kind of stable compared to the GBP over a long time.
Exports sales grow nicely, but represent on average around 10% of sales:
2022 results are down a bit.
Net Profit after Tax declined by 3.2% to Taka 4,998.6 million on comparable terms, “mainly because of one-off deferred tax benefit that accrued from the changes of income tax rates in previous year. In the context of rising material and freight costs, sharp depreciation of domestic currency and high inflation, the industry is facing increasing challenges as the prices of medicines are not readily flexible to absorb the increased cost.“
“Moreover, the Unit- 3 manufacturing facility built to ease our capacity constraint and secure our future needs, has become operational this year. The depreciation and other operating costs are now being charged as manufacturing overheads following the accounting standards. All these combined has brought down our gross margin as a percentage of sales to 45.6% from 47.2% of the prior year.”
2022 had a covid boost:
The Company recorded a net amount of Taka 619 million as (Covid) Vaccine Distribution Fee in the reporting period. This will not be repeated.
2023 is down further in terms of profitability, including the last quarter, which was worse, but still profitable.
Profit after tax decreased 15.1%
Net revenue increased 6.6%
The net profit margin went from 11.8% to 9.5%, which remains healthy.
So, 2023 has so far been very hard on the industry. Taka currency devaluation and fixed prices caused profits to drop.
The currency, which was sort of stable for 10 years started crashing mid 2022.
