Unique Biotech Limited Zauba

[Giraldo Allain]

Lactulosecapacity of 2400MT/Annum. Lactose India has done 30cr capex for putting up Lactulose. This is better margin business as it is 3rd derivation of Lactose. This business is very interesting (pls try reading up more on this). Impact of Lactulose will largely come in FY17/FY18. Current numbers are largely reflection of stabilization of Lactose for Kerry.

Margins continue to expand very smartly (EBIDTA Margins at 45% compared to 29% in previous quarter and 18% same quarter last year). This is big improvement. Even after adjusting for inventory gains & bad debts. Margins are 37% odd.

Lactose India is a very unique play on Lactose/Lactulose with company at inflection point. Delta in numbers should continue to be big and provides extremely lucrative risk/reward. Potential upside can be really big.

Disc - Invested.

Hope that helps.

Thanks.

Lactulose brands in India - Abilact from ABL Lifecare , Abilose from Alpic Biotech , Actual from Biosans , Ag-Loose from Agron Remedies , Agilax from Agio , Aklax Plus from Akesiss , Amylux from Amray , Biolac from United Biotech , Bowelac from Durga...

One missing part of the puzzle though, which other companies are making the basic lactulose solution (product from Lactose India) in India ? (not the finished dosage like what we see in the link above).

Any ideas ?

Thanks.

Checked their website, -generics-taj-pharmaceuticals.htm

Still get the impression that they are selling the finished dosage, not the bulk lactulose solution which Lactose India is going to produce.

I would appreciate if you can explain us for such a low RM cost. In fact in Q2, if we adjust inventory increase, net cost of RM is 4 as against total sales of 97! Such kind of value addition can happen only in fraud or real jewel. Not sure but need more understanding about same. I have gone through Audit report for FY15, no where company has mentioned about its input. Also, some issue about getting in advance revenue for capacity lending/building from MNCs. While per se do not see problem as give indication of strong bargaining power, but fail to understand Q2 result. Would appreciate if you can give some idea about raw material, input output norm, market price of end product and raw material as nothing is available in annual report.

Regarding the market price for end product, one of the reliable source i could find is zauba. It shows 46/kg as rate for imports and i think the duty of 47% is above this price. I am also scratching my head on the input raw material and price.

Same way you can check the lactulose solution price, it comes to roughly 3$/kg and 26% duty.

The lactulose market looks interesting. From the import figures the rough guesstimate is that India is importing 2200-2400 tonnes per annum of lactulose. This seems to be primarily from Fresinus Kabi plants in Austria and Italy and Danipharm from Denmark. There also seem to be some shipments from the UK.

The trading behaviour of this scrip looks very strange with no sellers but a single buy order at UC for a few lakh shares. The usual traded volume was a few thousand shares not very long ago. Better watch out

Lactulose market is indeed very interesting. Globally, as per some literature, there are 9 major producers and you are right Fresenius and Danipharm are 2 from that list and seems we are importing major qty from them.

Lactulose in the formulation form is being made by almost every company under the sun. It is the bulk space where Lactose India competes and we need to determine if it really is niche and that is what we need to figure out. What makes it niche- is it access to process technology, raw material access or something else.

Actually the raw material for lactose/lactulose production (whey permeate solids) is considered as a typical waste product when cheese is produced from milk. The waste normally goes into effluent treat system unless used for producing derivatives such as lactose/lactulose. Attaching the file with more data on this.

As per Latest Import data, India is importing majority of Lactulose from AUSTRIA, GERMANY and ITALY @ prices varied from rs.170 per kg. to rs. 200 per kg.So, production capacity of 4200 MT P.A. of Lactulose of the company can generate revenue of 71.40 crores in a year @ rs. 170 per kg. Link -product-Lactulose.htm

Similarly, Latest Export data reveals that India is exporting Lactose @ prices varied from rs. 62 per kg. to rs. 220/- per kg.So, production capacity of 11000 MT P.A. of Lactose of the company can generate revenue of 68 crores @ rs. 62 per kg. in a year. Link -product-Lactose.htm

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