Prevest Denpro Limited (543363) Q1 FY23 Earnings Concall Transcript

Prevest Denpro Limited (NSE:543363) Q1 FY23 Earnings Concall dated Aug. 12, 2022

Corporate Participants:

Atul Modi — Chairman and Managing Director

Namrata Modi — Executive Director and Chief Financial Officer

Analysts:

Vimal Modi — Puneet Capital — Analyst

Vinay Jamval — Financial Advisor

Ganesh R — Individual Investor — Analyst

Abhishek Sharda — Individual Investor — Analyst

Deepanshu Jain — Individual Investor — Analyst

Jatin — RTL Investments — Analyst

Astha Jain — HEM Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Prevest DenPro Limited Q1 FY’23 Earnings Conference Call hosted by HEM Securities. [Operator Instructions]

I now hand the conference over to Ms. Astha Jain from HEM Securities. Thank you and over to you, Ma’am.

Astha Jain — HEM Securities — Analyst

Thank you. Good afternoon ladies and gentlemen. Thank you for joining the Prevest DenPro Limited Q1 FY’23 earnings conference call. Joining us on the call today are the senior members of the management team, Mr. Atul Modi, Chairman and Managing Director; Mrs. Namrata Modi, Whole Time Director; and Mr. Vinay Jamval, Financial Advisor of the Company.

Going ahead we will commence the call with the opening thoughts from the management team, post which we will open the forum for Q&A session where the management will be glad to respond to any queries that you may have.

At this point I would like to add that some of the statements made or discussed on the conference call may be forward looking in nature. The actual results may vary from the forward-looking statements.

I would now like to hand over the call to Mr. Atul Modi to commence by sharing his thoughts on the performance and strategic progress made by the company. Thank you, and over to you, sir.

Atul Modi — Chairman and Managing Director

Thank you, Astha. A very good evening to all of you. I am happy to welcome you all for this conference for quarter one financial year ’23 financial results. The quarter one financial year ’23 marked a significant growth in our business. Our team delivered strong quarter while the world has still not got out of the COVID-19 here and is also facing inflationary pressures due to shortage of raw materials, the rising cost of raw materials, increased rate costs and supply chain disruption.

Russia-Ukraine war has also caused economic instability in many European and CI countries. Despite all these challenges, our company has done exceptionally well and we have posted robust financial results for the quarter one financial year ’23.

We have impressive quarter-on-quarter in terms of revenue and PAT. Our financials demonstrate that durability and strength of our business with increased acceptability of our products in various countries and entry in new countries like Saudi Arabia, Netherlands, Colombia, et cetera, our export business has registered impressive growth in quarter one financial year ’23.

As part of our growth strategy in the current financial year, our focus is to enter in the US, Brazil and Russian market which are very promising markets for our products. In the current financial year, we are attending many international dental accreditation to showcase our products to generate business contacts that will help us to grow our export business in the coming years.

We are also attending all major dental accreditation in India in this financial year to create strong brand awareness and increase our customer base in India. With all these efforts, we are very confident that our business will grow at a faster pace.

According to the World Health Organization estimates, 2.53 billion people suffer from decay of permanent teeth globally due to poor oral hygiene. Moreover, approximately 530 million children suffer from carries a primary teeth worldwide. With increasing organization and rapid changes in the living conditions in most of the low and mid income countries, the prevalence of oral disease is expected to increase. Rising incidences of dental diseases is anticipated to propel the growth scenario of the global dental materials market over the next decade.

Based on the product type, the market is segmented as indirect restorative material, direct restorative materials and other direct restorative materials like dental biomaterials, dental bone grafts, tissue regeneration materials – membranes, impression materials and bonding agents. Based on the application, the market is segmented into endodontist, prosthodontist, orthodontics, periodontics, restorative dentistry and aesthetic dentistry.

Our R&D department is working on the development of new innovative products to meet the growing needs of modern dentistry. New equipment for augmenting and streamlining the existing plant capacity has been successfully installed for better productivity and growing production requirements. With this newly installed equipment, we can fulfill the market demand for the next five years. Our new our R&D center should be operational in quarter two financial year ’23.

New facilities are the manufacturing of disinfectant oral hygiene products, oral care products and biomaterials is under advanced stage of implementation. Hopefully the new facility should be fully operational in quarter three financial year ’23, subject to the regulatory clearances.

With the comprehensive product portfolio, the business prospects are very bright for our company and we are well on way to deliver another year of strong double digit growth.

I thank all the investors attending this conference and also for their unprecedented overwhelming support to our company during its whole journey.

Now I will ask Mrs. Namrata Modi, Executive Director and CFO to present the financial results. Over to Mrs. Namrata Modi.

Namrata Modi — Executive Director and Chief Financial Officer

Thank you, Mr. Modi. Good afternoon, ladies and gentlemen. I am delighted to present the results of the first quarter of financial year ’23. The company has delivered [Technical Issues] INR1298.38 lakhs and PAT of INR368.18 lakhs in quarter one of financial year ’23 against revenue of INR1019.32 lakhs and PAT of INR246.24 lakhs in the immediate previous quarter, thus reporting a quarter-on-quarter growth of 27% in revenue and 50% in PAT over previous quarters.

Further the company’s EBITDA stood at INR519.44 lakhs versus INR376.70 lakhs in financial year ’22 quarter four, thereby registering a growth of 38%. Our numbers talk about our growth story. With the strong business fundamentals, we have a positive outlook and very optimistic view for [Technical Issues]. Once again, I thank you all of you.

Over to [Indecipherable]

Operator

Ma’am, would you like to begin with the question and answer session? This is the operator. Can you hear us, the management?

Astha Jain — HEM Securities — Analyst

Yes, I think you start with the Q&A.

Questions and Answers:

 

Operator

We can start with the QA, right? Alright.

[Operator Instructions] We have the first question from the line of Vimal Modi from Puneet Capital. Please go ahead.

Vimal Modi — Puneet Capital — Analyst

Hello, am I audible?

Operator

Yes, we can hear you.

Vimal Modi — Puneet Capital — Analyst

Hello Mr. Atul Modi, hearty congratulations for a stunning performance this quarter. I have six very basic questions. Shall I ask you all the questions together or shall we take up one-by-one? Together is better, I think?

Atul Modi — Chairman and Managing Director

Yeah. You can — together just let me give you a consolidated reply to all your questions.

Vimal Modi — Puneet Capital — Analyst

In that case you will have to note down that is why I asked.

Atul Modi — Chairman and Managing Director

Okay.

Vimal Modi — Puneet Capital — Analyst

Thank you, sir. My name is Vimal Modi sir, I am from Bombay, Puneet Capital. My first question is related to our expansion and FDA approvals for USA and Canada. So how much sales are we expecting for current and next year from those new markets? That is question number one. Shall I go ahead?

Atul Modi — Chairman and Managing Director

I will give you a reply for this question. We have already received the US FDA clearance for around 20 products now. Over the last quarter and in this quarter we have received some more clearances. So now total we have about 20 products and already we have identified some potential buyers in US who have shown keen interest to have business cooperation with our company and we have already submitted our samples to them which are under evaluation, because selling products in US which is a high price and high quality market, evaluation is a very lengthy process.

So our samples are going through the evaluation process and we have already planned a visit to US in the next couple of months time. By the time we expect that our evaluation of the samples will be over and we have set up the meetings with five potential buyers, very reputed buyers in US who have shown keen interest and we have set up the meetings to — so that we can have face-to-face meetings, and we can negotiate the business terms with them.

And we are planning to visit and hopefully in our visit to US, we will be able to finalize the business dealings with them and our business will start thereafter. So we are expecting that there will be some revenue generation from our export to US market in financial year. But I cannot quantify the amount because it is still very premature stage, but the progress is going on and we are very satisfied the way the things are moving for the US market.

So we are very confident that our business will grow and we will have very good business from the US in the coming times.

Vimal Modi — Puneet Capital — Analyst

Which is the major product or which US would like to buy from our company?

Atul Modi — Chairman and Managing Director

See, 20 products, we have 20 products which are all high-end products, which have very good demand in the US market. So all these products, you know, different buyers have shown in different types of products and some of them are even talking about contract manufacturing. So we are working on various business models and everything will be clear during our meeting in the US.

In the month of November, we have planned to visit US and there is a very big exhibition in New York. We have already booked space in the exhibition. We will be showcasing our products in that exhibition so that we can get more business contacts and we have — we can have direct meetings with our buyers and finalize the business. So, that is going to give us a very big push once we are in US.

And when we are showcasing our products, we will be able to enter into business contracts for long term business. So, I am very hopeful that after our visit to US, our business will start at a faster pace and we can have good revenue in this financial year and for the future also we can have long term business contracts with those companies.

Vimal Modi — Puneet Capital — Analyst

Okay. Sir, we have 3 lakh dentists as per our report in India. So, how many are we directly connected with? Out of these 3 lakhs dentists all over India, how many are we directly connected with? Do we take any efforts to directly connect to dentists?

Atul Modi — Chairman and Managing Director

See, directly, because we are not directly supplying our products to the dentist. We are supplying the products through the distributors and dealers. So, we have the database of about 45,000 dentist and — who are in contact with us through — we are sending them newsletters, mailers and time-to-time publicity material. But directly we are not dealing with them.

So we are not having direct — you know, our marketing team, which is — who are visiting the dentist regularly, they have the information about the dentist. So we have about 25 dental marketing executives connected with our distributors. They are meeting with the dentist, but company is not directly selling the products to the dentist, and therefore, the distributors are responsible for maintaining the relations and selling — relations with the dentist.

Vimal Modi — Puneet Capital — Analyst

Okay, thank you, sir. 45000 is little less because there are 3 lakh dentists?

Atul Modi — Chairman and Managing Director

Yeah. See, dentists data is available with the company, but the data available with our marketing team and also the data which is available with the distributor is different. But companies directly connected with about 45000 dentist, regularly sending them the mailers and this database is increasing, because we are getting contacts with the dentist. Today — every day new dentists are joining our database and we are — that the database is increasing and you know, it will be — we will have more dentist on our database very soon.

Vimal Modi — Puneet Capital — Analyst

Yeah, sir. This is — because this is a digital age and it is very easy to approach once the contact is established, this is my personal feeling. We must directly connect to all, if not all 3 lakh, at least half of them we must directly connected by this coming year. Anyway, sir.

Atul Modi — Chairman and Managing Director

We are making all of our efforts to reach out to the maximum dentist through digital, social media platforms and we are making, you know that is the focus plan for us, that we should have more digital marketing activities, so that we are connected with more and more dentists through social media.

Vimal Modi — Puneet Capital — Analyst

Sir, our PAT margin is growing over 20% every year, okay? PAT margin, it is there in the presentation. So, I would like to know, this is a phenomenon growth as far as PAT margin growth is concerned. So, can you tell me what is the major contributor to this growth? [Speech Overlap] Let him give the reply at the end, sir. My next question is similar I think CAGR growth estimate for coming two years, I would like to have, CAGR growth estimate for coming two years?

Vinay Jamval — Financial Advisor

Good afternoon. Your first query was with respect to our PAT margin. If you look at their last quarter, the present quarter, so we are growing at a very comfortable margin, let us say 40% and with the — in the next quarter, since we have got the US FDA certification and we are going for the new market where the margins are proportionately better as compared to the national market, so profit margin — we expect that the profit margin will improve as compared to the quarter first of financial year 2022-’23.

Vimal Modi — Puneet Capital — Analyst

Okay, sir. You talked about contract manufacturing. So, do we have — how much spare facility — I mean, facility do we have for doing contract manufacturing of high demand products?

Atul Modi — Chairman and Managing Director

Recently, we have modernized and we have installed new equipment in our factory to streamline our production to augment our capacity. So we have now sufficient capacity to cater to the growing requirements of the market. And you know, previously every time we tell that we are operating at a one shift basis. So we have sufficient capacity, if we operate the second shift and are we extend the first shift, so there is no problem with the capacity at all.

We have sufficient capacity for the next five years and with the modernization and the expansion activity which we have undertaken now, already we have installed new machines which are high speed machines, which can produce more quantity, more volumes. So with this, we are very comfortable as far as the capacity is concerned. So there is no problem at all regarding the capacity and we can do the contact manufacturing, so any type of business activity, whether it is our own brand production or it is contract manufacturing, we are very comfortable as far as the capacity is concerned. There is no problem. No constraint.

Vimal Modi — Puneet Capital — Analyst

Thank you, sir. How much CapEx we did actually and how much is spending CapEx?

Atul Modi — Chairman and Managing Director

Already we have spent around INR1 crore on the modernization and INR1 crore more we will be spending in the next few months.

Vimal Modi — Puneet Capital — Analyst

This is last question, sir, now. When are we planning to migrate to main platform?

Atul Modi — Chairman and Managing Director

We are expecting to migrate to the main board in another one year’s time. This is expectation.

Vimal Modi — Puneet Capital — Analyst

Okay. Thank you, sir. Thank you so much for answering all the questions.

Atul Modi — Chairman and Managing Director

Thank you so much.

Vimal Modi — Puneet Capital — Analyst

I am done. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Ganesh R, an Individual Investor. Please go ahead.

Ganesh R — Individual Investor — Analyst

Hello, sir. Congratulations for the very good set of numbers. During our call after the Q4 results, you mentioned there were some disruptions in the payments and because of that the treatments did not happen during the March quarter. So I assumed that, it would have spilled over into the Q1, that is the quarter ending June. So, do you see similar disruptions continue to happen now also?

Atul Modi — Chairman and Managing Director

Our order book is very comfortable at present. We have sufficient orders and we are very comfortable and we are very hopeful that we can continue with our growth and definitely the business prospects are very bright and we do not see any reason for our business not growing at the same level as we have done in this quarter. So we will continue with the same growth and hopefully that business will continue to grow like this.

Ganesh R — Individual Investor — Analyst

Very good, sir. But do you see any lumpiness in terms of revenue because of what is going on at the — in Euro because of the recessionary trends there, do you see that there can be some delay in getting the advanced payments, et cetera?

Atul Modi — Chairman and Managing Director

So far we have not faced any payment issues with any European countries. They don’t have any payment problems for our products, because these are very essential items, healthcare products. They have enough funds available for the purchase of health-related materials and products.

So we are still getting all our business on 100% advanced payment basis from European countries. We are very comfortable and we have never faced — we do not foresee that there will be any problems with the payments from the European countries. From other countries also, we have not so far faced any payment issues.

Ganesh R — Individual Investor — Analyst

Okay. And how is the business order through come Saudi Arabia? Last time you mentioned about an opportunity for a million dollar size also. How is that market is evolving?

Atul Modi — Chairman and Managing Director

Our products are selling in very good quantity in Saudi Arabia. We are getting very good orders from Saudi Arabia and we are very hopeful that our business will grow much better in Saudi Arabia in the next financial year. This financial year also we have a contract with the Saudi Arabian company, big amount. So we are very confident that our business in Saudi Arabia will grow much better in the coming times.

Ganesh R — Individual Investor — Analyst

Okay, sir. It’s very good to hear that. And last one book-keeping question. The employee cost used to be fluctuating a little widely between quarter-to-quarter, Q4 was high. I mean, Q1 it was down. I mean, is it some one-off items included in that?

Atul Modi — Chairman and Managing Director

Sorry, I did not get your question.

Ganesh R — Individual Investor — Analyst

The employee cost.

Vinay Jamval — Financial Advisor

Let me answer. [Technical Issues] There is a fluctuation in the employee benefit cost. If you go through quarter three of the financial year ’21-’22, the expenditure with respect to employee benefit cost was INR1.56 crore plus — that was INR1.57 crore and for the fourth quarter it was INR2.29 crore and whereas for the current quarter that is pending 30th June 2022, the expenditure is INR1.87 crore.

The reason for this [Technical Issues] is that initially, before the IPO, the company had a policy of making the provisions — all the provisions at the year end, whereas, from now onwards what we are doing, we are making the provisions on the quarterly basis. This is the main reason why our profitability for the quarter ending 31st March, 2022 were much higher as compared to its preceding quarter as well as the succeeding quarter.

So, if you go by the third quarter, it was 1.57 crore. Now it was INR2.29 crores fourth quarter. Present quarter, quarter one of ’22-’23, INR187.55 crores [Phonetic]. So the differentials that has been inflated in the quarter four was due to the provisioning of the employee benefit cost. This is the only reason why there is a high cost of employee for the fourth quarter after — just concluded financial year.

Ganesh R — Individual Investor — Analyst

Okay sir, Sir, going forward it is going to show up every quarter, so it won’t get bunched up in the Q4, is that correct?

Vinay Jamval — Financial Advisor

Sorry, I did not get you. Can you please repeat it again?

Ganesh R — Individual Investor — Analyst

Sir, I just wanted to understand, so going forward, it is going to be evenly distributed across all the four quarters?

Vinay Jamval — Financial Advisor

No. From this year onward, we have changed the quoting policy wherein the provisioning will be done on quarterly basis for all the expenses. It is not only the employee benefit cost, even the insurances cost, all cost which accrue — which has a benefit for a period more than a quarter period, will be accounted for an accrual basis and a timely basis and quarterly basis, that will be taken care of.

Ganesh R — Individual Investor — Analyst

Okay sir, understood. The last question is what is that CapEx that is planned for this financial year?

Atul Modi — Chairman and Managing Director

Mr. Jamwal will reply.

Vinay Jamval — Financial Advisor

So, as far as the CapEx is concerned, we have proposed an expenditure of say INR2.9 crore for the existing renovation, renovation at existing plant and machinery, INR8 crore for further R&D and another INR8 crore for the expansion projects and modernization, right?

For that purpose, we expect that as far as R&D is concerned, we will be able to complete it by the end of this quarter, by the end of September. It will be in a workable position and as far as the diversification is concerned, management expect that it may cement by the end of third quarter, if the things move as planned by the management.

And the CapEx will take — will be add further planned, formulated and shown in the prospectus [Technical Issues]. It will be completely moved in a sync reaction and as and now, we have major expenditure of INR1.03 crore for the existing business and the INR5.30 crore for the new diversification business and INR4.70 crore for the R&D. As of now we have made an expanded CapEx expenditure [Technical Issues] INR11.04 crore.

Ganesh R — Individual Investor — Analyst

Very good, sir. Thank you and wish you all the best.

Vinay Jamval — Financial Advisor

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Abhishek Sharda [Phonetic], an Individual Investor. Please go ahead.

Abhishek Sharda — Individual Investor — Analyst

Yeah. Hello, sir. Thank you for giving me the opportunity and congratulations for a great set of numbers. Sir, I have a couple of questions. First of all, what is the progress regarding new capacity which was expected to get functional in Q3 this financial year?

Atul Modi — Chairman and Managing Director

See, we have already invested INR1 crore on the modernization of the existing factory, and another INR1 crore is expected to be invested in the next quarter in quarter two or up to quarter three, so with the present investment, we have already streamlined — some of the bottlenecks have been streamlined and the production has already increased. Capacity has already increased and some more equipments we are going to buy.

And, because we know the equipments — we have to import such type of equipments for the [Indecipherable], the dental materials are not available in India, so we are sourcing it from other countries. So this process of modernization will be completed in the third quarter. But partially we have already achieved the modernization and streamlining of the bottlenecks to our existing manufacturing facility.

Abhishek Sharda — Individual Investor — Analyst

Okay, sir. That’s helpful. Sir, can you please provide revenue guidance and margin guidance for FY’23?

Atul Modi — Chairman and Managing Director

We are projecting good revenue, but we cannot give any exact figure, but definitely it will be in the more than INR50 crore in the next — in this financial year. But as the trend — business trend is growing, so we are very hopeful that we should be crossing INR50 crore in this financial year.

Abhishek Sharda — Individual Investor — Analyst

INR50 crore, the topline and sir, margin guidance?

Atul Modi — Chairman and Managing Director

If you look at the margins, we are maintaining the margins and we can maintain the same. We can sustain this same level in this financial year, because our focus is on value added products and we can maintain the same profitability, same bottom line also. So we will be trying the best to maintain the same bottom line and the topline will be over INR50 crore this financial year.

Abhishek Sharda — Individual Investor — Analyst

So. sir, can we like assume that the current operating margins are sustainable operating margins in the long term also, right?

Atul Modi — Chairman and Managing Director

Yes. These are sustainable.

Abhishek Sharda — Individual Investor — Analyst

Okay. Okay, sir. That’s very helpful. Thank you. I will come back in the queue.

Atul Modi — Chairman and Managing Director

Thank you so much.

Operator

Thank you. We have the next question from the line of Deepanshu Jain, an Individual Investor. Please go ahead.

Deepanshu Jain — Individual Investor — Analyst

Good evening, sir. First of all, congratulations for a great set of numbers. I will have two, three questions. First, what is our strategy to penetrate more into global market?

Atul Modi — Chairman and Managing Director

Sorry, please, can you please repeat the question?

Deepanshu Jain — Individual Investor — Analyst

Sir, what is our strategy to penetrate more into global markets?

Atul Modi — Chairman and Managing Director

Yeah. See, we are very proactive in the international market. We are making our work efforts to reach out to more and more countries. At present our export is only in 85 countries. So we are targeting another 10 countries in this financial year. So our focus is on Brazilian markets, Russia and the US partly, because these are the very high potential business market places. So we are focusing on these countries.

Our marketing team is already visited Brazil next month. They are visiting Russia and then we are moving to USA to explore the business opportunities in these three countries. And we got very good response from the Brazilian market. Already the sampling process has been started. So these are the three biggest markets in the — international markets where we are going to have our focus.

And we are reaching out to maximum number of dental dealers in these countries and by taking part in the exhibitions, we can develop business contacts and we can develop business potential buyers. We can have meetings with them and that is in definitely resulting the beginning of our business in these countries. So these are the potential markets where we are going to focus.

And besides that, we are looking at other countries, smaller countries and we are getting very good response. And we will be definitely doing much better in the international market in this financial year.

Deepanshu Jain — Individual Investor — Analyst

Okay, sir, okay. Sir, can you say the revenue contribution from our top products?

Atul Modi — Chairman and Managing Director

See, we have about 20 top products which are contributing to our — maximum to our revenue and we are focusing on the marketing and — of these products in the international market also. And even in US, we got all these 20 products registered and cleared by US FDA. So these are the top end products for our country, which are bringing the maximum revenue. So our focus is to sell these products in the maximum quantity, so that we can improve our bottom line and we can also improve our topline, because these are very high value products with high value additions.

So this is our strategy at present, promoting the products — high value products and — high value added products. So this is our strategy at present.

Deepanshu Jain — Individual Investor — Analyst

Okay, okay. And sir, what is our top one and top five product revenue contribution?

Atul Modi — Chairman and Managing Director

Top fund product is our restorative materials, composite filling materials and other products which are the — top selling products are our glass monomer cement, these are also restoring materials. Then we have a range of endodontic materials. So these are the products which have in market — mostly used by the dentist. Every dentist requires restoration for filling of the broken tooth and cavities filling and also for root canal treatments. So these are the materials which are most commonly used by all dentists worldwide. So we are focusing only on these materials.

Rest of the products, we have over 100 products. Out of the 20 products are the best selling products. But rest of the products have the complementary products. They cannot do any treatment without those 70, 80 products. But the high value products are 20 products which have got the maximum profits. So we are focusing on selling those products and they are bringing us the maximum revenue and the margin.

Deepanshu Jain — Individual Investor — Analyst

Okay, sir. And sir, last question, what are our core competencies on an export market?

Atul Modi — Chairman and Managing Director

See the prices, you know, being a product made in India, our pricing is very, very complicated. Second competency is that we got all quality certifications which are required for export to international market. So we have got all the quality certificates from the European notified bodies. And third is the product range.

You know, we are covering all the spectrum of dental — dentistry, so we are covering endodontic, like covering, restorative materials. So that is the USP for our company that we got good pricing. We got quality certification. We got a very good product range.

So with all these three things, we are able to compete with multinational companies all over the world and we are getting very good results — business growth in all these countries because of these three factors.

Deepanshu Jain — Individual Investor — Analyst

Okay, sir. That is it from my side. Thank you for detailed responses.

Atul Modi — Chairman and Managing Director

Thank you so much.

Deepanshu Jain — Individual Investor — Analyst

Thank you so much.

Operator

Thank you. We have the next question from the line of Jatin from RTL Investments [Phonetic]. Please go ahead.

Jatin — RTL Investments — Analyst

Yeah. Hi. Good evening, sir. A couple of questions. So first one is, I just wanted to understand the competitive dynamics in the industry, both in India and abroad, like who are your main competitors? And in terms of let us say if you — I think globally, your market share would be very small, but in India what is the size of the market and what would be your market share within that?

Atul Modi — Chairman and Managing Director

See, the main competition is from the multinational companies. In India, we don’t have competition — much competition from the domestic manufacturers because they are — compared to our size of industry, they are very, very small. And we have got all the quality certifications. We have a well organized professionally managed company. So we are competing directly with the multinational companies.

So multinational companies, they have history of more than 100 years. They are pioneers in the dental industries. They are basically from Europe and the USA. They are — they have a very strong brand value in the market. So we are competing with them. It is a very tough challenge for our company to compete with the multinational companies and it is not only in India, worldwide we are competing with them and we are getting very good response.

Now our business is growing year-on-year and the growth is phenomenal, you know, 30% to 40% every year we are growing. So this kind of growth is only possible if we have a high quality of production. We have good pricing. We have good marketing strategies, then only we can sustain this growth. And we have been [Technical Issues] for years our business is growing at a very good rate.

So we can continue with the same growth and we can — because, you know, when we set up our own R&D, when it becomes operational, newer products will be introduced by our company through our own internal R&D. So definitely we will have edge over all these companies and we can compete with all the multinational companies worldwide, better way products costing is low because the products are made in India. Cost of production is low compared to the production costs in Europe and the USA

So these are the advantages which we have and that’s the reason that our growth rate is so high. And it will further go up when we have a new product range in the next financial year when we come up with the new diversified product range. We can hope for a much higher growth in the next financial year. But with our present product line also, we are expecting to maintain the same topline growth and bottom line will also be maintained.

Jatin — RTL Investments — Analyst

Sure, sir. Sir, just one question follow up on that, when I think about this from a dentist doctor’s perspective, the value of the material in the overall job that he must be doing, must be very small, right? So in that case, why does the doctor carry — care so much about the raw material cost of the feeling that he’s doing?

Is that — why would he take a chance on his reputation, trying a new product when the overall cost of the procedure is so high and the cost of the material that is being filled is very small? So that is something I was not able to understand.

Atul Modi — Chairman and Managing Director

The cost of material is also not — it’s also very high, because the raw materials are very expensive and very high quality raw materials. So processing cost is also there. The dentist, you know, they are professional. They have very high cost of treatment. So it is not only the material cost, it is the procedure costs. There are lot of consumables, lot of equipments are required for the dental treatment.

So, that is the reason the dentist, they are also charging very high. But compared to the international market, in India the cost of treatment is very low. Internationally the cost of treatment is very high. So our material cost is — it’s not small. The cost of material is also quite expensive for a dentist.

Jatin — RTL Investments — Analyst

And what makes your cost of production so much lower compared to the MNCs? Like in the production process, I am assuming this would not be very labor intensive. So, what is it that really makes your cost of production so much lower compared to the MNCs?

Atul Modi — Chairman and Managing Director

See, first is that, all the raw materials which we are using, are almost the same raw materials which other companies are using internationally. We also buy it from the same suppliers. It’s only the cost of production other than the raw materials you know, the labor cost, power cost, other overheads, they are low compared to the multinational companies. Their overheads are very, very high. So, that is the reason that our cost of production is comparatively low

And the products which are made in Europe, they are very expensive, So — because the European cost of production is definitely much, much higher than what is the cost of production in India, other than the raw material cost. Rest of the things are comparatively much cheaper in India. So that is the reason that our cost of production comparative to European manufacture is quite low.

Jatin — RTL Investments — Analyst

And how low would be your pricing compared to some of this MNC players? What’s the pricing gap?

Atul Modi — Chairman and Managing Director

Pricing gap could be 30% to 40% compared to the European and US manufacturers. We are 30% to 40% lower than that.

Jatin — RTL Investments — Analyst

All right. Despite that you are able to make 40% EBITDA margin?

Atul Modi — Chairman and Managing Director

Yeah, yeah. Because the cost of materials is compared to — because, you know, there is a good value addition, so these are very specialized products. So the margins are good and that is why we are maintaining high profitability, because there is a good amount of value addition. These are formulations, not general type of products, not everyone can make the product.

There are very few companies who can make such type of products. We have the technology expertise and that is the reason that we can sell at a very good price and we can make good profit margins out of that.

Jatin — RTL Investments — Analyst

Sure. Sure. Great. Thanks a lot, sir, for patiently answering my questions.

Atul Modi — Chairman and Managing Director

Thank you so much.

Operator

Thank you. That was the last question. I now hand it over back to Ms. Astha Jain for closing comments.

Astha Jain — HEM Securities — Analyst

Thank you. On behalf of HEM Securities Limited, I thank Prevest team for giving us a detailed insight on results and the time we spent on this call. I would also like to thank all the participants for joining this call. It was an extremely fruitful discussion.

Thank you all for being on the call. I would like to hand over the call to the moderator.

Operator

[Operator Closing Remarks]