JHSNSENovember 10, 2023

JHS Svendgaard Laboratories Limited

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9analyst exchanges

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Management on call

Nikhil Nanda

MANAGING DIRECTOR – JHS SVENDGAARD LABORATORIES LIMITED

Ashish Goel

CHIEF FINANCIAL OFFICER – JHS SVENDGAARD LABORATORIES LIMITED

Mohit Goel

JHS SVENDGAARD LABORATORIES LIMITED

Rupesh Rege

ADFACTORS PR PRIVATE LIMITED

Key numbers — 40 extracted

300 million

lio. At that point of time, we were looking at setting up a huge manufacturing facility of almost 300 million toothbrushes in 2004 when the total Indian market was only about 650 million. The banks were not

650 million

facility of almost 300 million toothbrushes in 2004 when the total Indian market was only about 650 million. The banks were not too enthused by my idea of setting up a huge facility, which I told them is b

rs,

f our premium customers and we added more product categories like hair colorings, hair straighteners, creams, lotions for them under the brand Vela and subsequently Tide and Ariel also came in as a pr

25%

rage our manufacturing infrastructure more efficiently which currently is operating only at about 25%- 30% and this would lead to better utilization, better asset churning and greater sales and prof

30%

ur manufacturing infrastructure more efficiently which currently is operating only at about 25%- 30% and this would lead to better utilization, better asset churning and greater sales and profitabil

INR18.93 crore

ng. So with respect to the second quarter ending 30th September 2023, we've reported a revenue of INR18.93 crores as compared to INR15.9 crores in the previous quarter. So there's a growth of approximately 19%

INR15.9 crore

quarter ending 30th September 2023, we've reported a revenue of INR18.93 crores as compared to INR15.9 crores in the previous quarter. So there's a growth of approximately 19% that we have achieved in the p

19%

rores as compared to INR15.9 crores in the previous quarter. So there's a growth of approximately 19% that we have achieved in the present quarter. So while yes as compared to the corresponding qua

10%

quarter. So while yes as compared to the corresponding quarter there's a decline of approximately 10% but that decline is mainly due to the strategic change in the customer's mix that we are targetin

ntly as compared to the previous quarter. So we have reported an EBITDA margin of 3% in the current quarter as compared to a negative EBITDA margin of 11% in the previous quarter. An

11%

reported an EBITDA margin of 3% in the current quarter as compared to a negative EBITDA margin of 11% in the previous quarter. And this is led by largely because of the change in the customer mix and

INR73 lakh

ment in the bottom line. So as far as our tag for the quarter two while that stands at a loss of, INR73 lakh but overall cash positive EBITDA margin is there. With respect to half year ended we have reporte

Guidance — 9 items

Nihar Mehta

“On another thing on the merger, as I was going through your presentation, is there any capex to be required as a part of this merger or same manufacturing units are going to be used for our new products, which will be added?”

Management

“Nanda mentioned earlier, Nihar, that there are a lot of clients for JHS which will come on Vedic, which will be given Vedic products and Vedic clients will get oral care from JHS portfolio.”

Nihar Mehta

“So how are you ensuring in terms of sales and distribution going forward in the business given globally whatever is happening?”

Nihar Mehta

“So in terms of sales, supply chain, distribution, how are you ensuring that it should be productive and efficient going forward?”

Nikhil Nanda

“I think we have a potential to double our business in the next one year to two years if we are able to cross-sell to all of them, which theoretically is possible, practically may not be possible because they have existing vendor base, but we feel that's the target that we've set for ourselves.”

Nikhil Arora

“So we can expect a rise in our exports in the coming quarters, if can you quantify that?”

Nikhil Nanda

“And then once we reach there, then probably the market will grow for the electric toothbrushes.”

Nikhil Nanda

“So that's the only change that will be required.”

Dhiral Jain

“How do you plan to align your business with the trend market trends in the oral care or oral hygiene market in general?”

Risks & concerns — 4 flagged

So while yes as compared to the corresponding quarter there's a decline of approximately 10% but that decline is mainly due to the strategic change in the customer's mix that we are targeting on.

— Ashish Goel

As I mentioned that this decline is primarily due to the change in the customer mix but that impact is a short term.

— Ashish Goel

So the next question I would like to ask is, how are you mitigating the risk associated with the global supply chain disruptions, like with war going on around?

— Supan Parekh

So I think first challenge is to get everybody to use a toothbrush.

— Nikhil Nanda

Q&A — 9 exchanges

Hi sir. Thank you for the opportunity. So actually I had just some of the balance sheet questions mainly regarding the trade payables. So why has it been decreased by almost around INR6 crores? I mean any particular reason for it? Since I mean it has kind of affected the working capital I assume?

Ashish Goel

Thank you Mr. Rajani for your question. I'll take a part. So these trade payables as I mentioned that we are in the first half of the current year. We have looked up to a change in the customer mix and the product mix. So ultimately being in the contract manufacturing space all the vendors are being suggested by the client. So all the vendors with respect to that particular client have been cleared off and that is what has led to change in the trade payables significantly. While the impact on the working capital cycle is temporary since we were in the transition process. But in the subsequent

Yes. So my first question is, can you provide me some insights into the company's research and development efforts moving forward and as well as in this particular quarter as well?

Nikhil Nanda

I think Mohit would be the right person to answer this. Mohit, would you like to answer that? Yes. So like Mr. Nanda said that Vedic is merging with JHS. Now Vedic has been primarily focused on supplies to the D2C industry where, as you are aware, a lot of quick turnaround that's needed. In the past 15 odd years, Vedic has spent a lot of time, effort in studying newer trends in understanding the concepts that may be required by the Indian consumer as well as consumers abroad. We have initiated a lot of new technologies, initiated a lot of new products which are easily available in the Indian s

Hi sir. I wanted to know are there any new product in development or have you acquired any new client in our portfolio?

Nikhil Nanda

As I mentioned there are two customers that we've added. One is Zydus Cadila for talcum powder and one is Reliance Retail for toothbrushes. And we have a potential to grow that business multi-fold considering the fact that now we have a much larger product portfolio with Vedic also by our side. Correct. So the clients of Vedic will also be in our clientele. Is my understanding correct? That's right. And our clients which we currently have also sell a lot of personal care products which Vedic currently manufactures. So we would be able to offer them also the product portfolio that Vedic owns. S

Hi, sir. Thanks for the opportunity. I just wanted to know if you're having any new strategy for expanding the product portfolio in the oral care and personal care industries? If you could shed some light on that.

Nikhil Nanda

Yes, I'm going on that. So basically, as I mentioned earlier, what we are going to do is, we've got a complementary list of customer base between Vedic and JHS, where we can cross-sell the products. So just to give you an example, a company like Dabur, all for whom we've been making toothpaste for the last 23 years, also sells a lot of personal care products. So recently, we've started manufacturing the Gulabari range of face wash for them at Vedic. So this is how we are reaching out to our existing customers, saying now these are the other product categories that we've added from Vedic. While

Yes. Thank you for the opportunity. My first question was in regards to Vedic. So what was the financials for Vedic in FY ‘23 and FY ‘22? I mean, in terms of top line and margins?

Nikhil Nanda

Mohit, would you like to take that? Do you want me to repeat the question? Yes, please. Yes. So I just wanted to know the financials of Vedic for FY ‘23 and FY ‘22. Like what are the top line and operating margins? So ‘22 and ‘23 were fairly close to each other. We were at about INR52 crores, INR53 crores top line. And the margins, we were working on 5% net profit in ‘22. And the same was about 0.5% in ‘23 because a lot of expansion expenses took place in the previous year. And what would be your operating margins? It would be somewhere under 7% to 8% range? Operating margins? You mean the gro

Actually, last time, because of some issues, I got cut it off. So my next question is, what new innovations or products are in the pipeline? How do they align with the customer needs and market demands?

Management

To answer that, Supan, what happens is that the R&D team or the new product development team at Vedic is continuously studying trends across the world and seeing how they can map it to the demands in the current customer base. Constant discussions happen where the business development team or the key account managers discuss with the product team at various brand levels and offer them products based on requirements that may be there. Okay. So the next question I would like to ask is, how are you mitigating the risk associated with the global supply chain disruptions, like with war going on aro

Thank you. I just have one question. I mean, with respect to this product innovation, are we also looking into electronic toothbrush? Any plans to get into it?

Nikhil Nanda

No, because electronic toothbrush is only 0.1% of the 15,000 crore market. In India, still, there's a huge unutilized or I would say untapped consumer base to the extent of 30%, 35%, which doesn't use a toothbrush still. So I think first challenge is to get everybody to use a toothbrush. And then once we reach there, then probably the market will grow for the electric toothbrushes. Right now, the market doesn't justify that. Okay, thank you. And you said like we are operating at 20 to 25% capacity, right? So what are we doing to, you know, onboard new clients or? Yes, so what we are basically

Hi, sir. Good afternoon. Thank you for this opportunity. So I wanted to ask, are there any indicators that the management or the company uses to measure success or track which goals have been fulfilled by the company? So are there any indicators that you use?

Nikhil Nanda

So basically, we have an annual plan which is made out every year. And we have a five year plan which is made out like we are going to be post Diwali when we normally have an off-site every year, where we formalize these plans. And basis those plans, then we start monitoring and looking at how we are faring on a month to month basis through a management review meeting. Okay, sir. So I wanted to ask, do you have any merger and acquisition plans for the coming year? Not for the coming year. This is the only merger that's scheduled with Vedic. Okay. Thank you. Also, I had one more question. How d

So I would like to thank the entire team of JHS and Vedic for the hard work, dedication that they all are putting into drive the company forward despite various market conditions that most of the businesses are facing, but specifically to our industry in particular. I appreciate all of you for participating in our conference call today, all the participants. Thank you very much for coming in and asking the relevant questions. You can get in touch with Adfactors, our Investor Relation team for any further queries that you may have and we look forward to interacting with you soon after our Q3 re

Management

Speaking time

Nikhil Nanda

Management

Irshaan

Moderator

Nihar Mehta

Ashish Goel

Supan Parekh

Manoj Rajani

Nikhil Arora

Dhiral Jain

Opening remarks

Nikhil Nanda

Thank you. Good afternoon, everyone. Thanks for joining this investor's call today about JHS Svendgaard Laboratories Limited quarterly results quarter two. Just to give you a quick brief background about the company, we started as a proprietary firm in 1997 with manufacturing of toothbrushes. Initially, we were making toothbrushes for some of the export brands. Subsequently, we tied up with Gillette, which were the proprietary owners of Oral-B at that point of time and we started growing, adding customers like Dabar, Amway, Patanjali, Colgate during the course of our expansion. We also added newer product categories like toothpaste, mouthwash, and dental accessories as part of our portfolio. At that point of time, we were looking at setting up a huge manufacturing facility of almost 300 million toothbrushes in 2004 when the total Indian market was only about 650 million. The banks were not too enthused by my idea of setting up a huge facility, which I told them is being built for the n

Ashish Goel

Thank you, sir. Good afternoon everyone. Thanks for joining. So with respect to the second quarter ending 30th September 2023, we've reported a revenue of INR18.93 crores as compared to INR15.9 crores in the previous quarter. So there's a growth of approximately 19% that we have achieved in the present quarter. So while yes as compared to the corresponding quarter there's a decline of approximately 10% but that decline is mainly due to the strategic change in the customer's mix that we are targeting on. And that strategy comes along with focus on better margin customers which are being preferred and with a short term impact maybe on the top line. And this how is ultimately reflecting on the numbers as well is that our EBITDA margins in the current quarter has improvised significantly as compared to the previous quarter. So we have reported an EBITDA margin of 3% in the current quarter as compared to a negative EBITDA margin of 11% in the previous quarter. And this is led by largely bec

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