Q2 2026 Mega Lifesciences PCL Earnings Call

August 14, 2026

Speaker #1: Good afternoon and a warm welcome to everyone on behalf of Mega Life Sciences. For today's earnings call, for today's session, we have with us our CEO, Mr. Vivek Dhawan.

Francis Rego: Good afternoon, and a warm welcome to everyone on behalf of Mega Lifesciences for today's earnings call. For today's session, we have with us our CEO, Mr. Vivek Dhawan, CFO, Mr. Thomas Abraham, Deputy CFO, Mr. Manoj Gurbuxani, Finance Director and Corporate Secretary, Ms. Sujinthana, and myself, Francis Rego. For today's session, we will have three steps. We will start with the finance overview first, showing the synopsis of the financial performance for 1H26 and 2Q26. This will then be followed by guidance and overview from the CEO, and then we will open the forum for Q&A. Before we move forward with the financial performance, I would like to mention a note which we had also shared with you during Q1 2026 call. This is about the implementation of the Thai Accounting Standard.

Francis Rego: Good afternoon, and a warm welcome to everyone on behalf of Mega Lifesciences for today's earnings call. For today's session, we have with us our Chief Executive Officer, Mr. Vivek Dhawan, Chief Financial Officer, Mr. Thomas Abraham, Deputy Chief Financial Officer, Mr. Manoj Gurbuxani, Finance Director and Corporate Secretary, Ms. Sujintana, and myself, Francis Rego. For today's session, we will have three steps. We will start with the finance overview first, showing the synopsis of the financial performance for 1H 2026 and 2Q 2026. This will then be followed by guidance and overview from the Chief Executive Officer, and then we will open the forum for Q&A. Before we move forward with the financial performance, I would like to mention a note which we had also shared with you during Q1 2026 call. This is about the implementation of the Thai Accounting Standard.

Speaker #1: CFO, Mr. Thomas Abraham. Deputy CFO, Mr. Manoj Gurbakshani. Finance Director and Corporate Secretary, Mr. Sujantana. And myself, Francis Rego. For today's session, we'll have 3 steps: we'll start with the finance overview first, showing the synopsis of the financial performance for 1H26 and 2Q26.

Speaker #1: Which will then be followed by guidance and overview from the CEO, and then we'll open the forum for opinions. Before we move forward with the financial performance, I would like to mention a note which we had also shared with you during Q1 2026 call.

Speaker #1: This is about the implementation of the Thai accounting standard. So, with the adoption of the Thai accounting standard 21, the effects of changes in foreign exchange rates which we had adopted in 2026, the group has adopted this standard and accordingly a market-based exchange rate for the Myanmar Chad against foreign currencies.

Francis Rego: With the adoption of the Thai Accounting Standard 21, the effects of changes in foreign exchange rates, which we had adopted in 2026, the group has adopted this standard and accordingly, a market-based exchange rate for the Myanmar kyat against foreign currencies. The implementation of TAS 21 has no material impact on the net profit for 1H26. Accordingly, the 1H25 and 2Q25 financial statements have been restated, including the statement of profit and loss, balance sheet, and other comparative financial information. This has been done in order to ensure a meaningful comparison with 1H26 and 1Q26, and it has no impact on the overall profitability, and it is only for providing a meaningful analysis. Moving forward with 1H26 performance, driven by the strong double-digit growth in both Mega We Care and Maxxcare business, which was supported by the continued improvement in operating conditions in Myanmar.

Speaker #1: The implementation of TAS 21 has no material impact on the net profit for 1H26. Accordingly, the 1H25 and 2Q25 financial statements have been restated, including the statement of profit and loss balance sheet and other comparative financial information.

Speaker #1: This has been done. In order to ensure a meaningful comparison with 1H26 and 1Q26, and it has no impact on the overall profitability and it is only for providing a meaningful analysis.

Speaker #1: So, moving forward with 1H26 performance, driven by the strong double-digit growth in both mega we care and max care business, which was supported by the continued improvement in operating conditions in Myanmar, the overall operating revenue in 1H26 was above 6.9 billion, which reflected a growth of 12.5% YOY.

Francis Rego: The overall operating revenue in 1H26 was THB 6.9 billion, which reflected a growth of 12.5% YOY. The branded business revenue in 1H26 was THB 4.6 billion, reflecting a growth of 11.9% on YOY basis. This was underpinned by continuous strength of the product portfolio and sustained demand across key markets. The distribution business revenue in 1H26 was THB 2.07 billion, reflecting a growth of 11.3% on YOY basis. The growth in revenue reflecting continued improvement in operating conditions in Myanmar. On the geographical front, Southeast Asia continues to be dominant and has 73% share of the Mega We Care business revenue. During 1H26 it posted a very strong, steady growth. Africa and Latin, and the rest of the world continue to show strong double-digit growth during 1H26.

Speaker #1: The above 4.6 billion, reflecting a growth of 11.9% on YOY basis. This was underpinned by continuous strength of the product portfolio and sustained demand across key markets.

Speaker #1: The distribution business revenue in 1H26 was 2.0 billion, reflecting a growth of 11.3% on YOY basis. The growth in revenue reflecting continued improvement in operating conditions in Myanmar.

Speaker #1: On the geographical front, Southeast Asia continues to be dominant, and has 73% share of the mega we care business revenue, and during 1H26 it posted a very strong steady growth.

Speaker #1: Africa and Latin and the rest of the world continue to show strong double-digit growth during 1H26. On gross profits, the overall gross profits in 1H26 improved to 52% of operating revenue as compared to 50.5% of operating revenue in 1H25, primarily driven by improved margins in both businesses.

Francis Rego: On gross profits, the overall gross profits in 1H26 improved to 52% of operating revenue as compared to 50.5% of operating revenue in 1H25, primarily driven by improved margins in both businesses. The branded business gross margins remained healthy and improved to 65.3% in 1H26 as against 63.7% in 1H25. The gross margins of Mega We Care business, as we always mention, are influenced by revenue growth, product mix, country mix, currency mix and level of output, amongst other factors. The distribution business gross margins improved to 23.9% of the operating revenue in 1H26 as against 22.4% of the operating revenue in 1H25. Gross margins of distribution business are influenced by principal mix amongst several other factors.

Speaker #1: The branded business gross margins remained healthy and improved to 65.3% in 1H26, as against 63.7% in 1H25. The gross margins of mega we care business, as we always mention, are influenced by revenue growth, product mix, country mix, currency mix, and level of output, amongst other factors.

Speaker #1: The distribution business gross margins improved to 23.9% of the operating revenue in 1H26, as against 22.4% of the operating revenue in 1H25. Gross margins of distribution business are influenced by principal mix, amongst several other factors.

Speaker #1: On the SG&A side, SG&A expenses were above 2.3 billion, reflecting an increase of 11.1% on YOY basis. The increase in SG&A is in line with planned spending and aligned with the overall business growth and strategy.

Francis Rego: On the SG&A side, SG&A expenses were THB 2.3 billion, reflecting an increase of 11.1% on YOY basis. The increase in SG&A is in line with planned spending and aligned with the overall business growth and strategy. SG&A expenses as a percentage of operating revenue decreased slightly from 33.4% in 1H25 to 33% in 1H26. EBITDA in 1H26 came in at about THB 1.6 billion, as against THB 1.2 billion in 1H25, an increase of 33.8% YOY due to the strong growth in both Mega We Care and Maxxcare businesses in 1H26 and supported by gross margin expansion. The reported net profits in 1H26 were THB 1.1 billion, as against THB 841 million in 1H25. Reported net profits increased by 33.1% for reasons explained above.

Speaker #1: SG&A expenses, as a percentage of operating revenue, decreased slightly, from 33.4% in 1H25 to 33% in 1H26. EBITDA in 1H26 came in at above 1.6 billion, as against 1.2 billion in 1H25, an increase of 33.8% YOY.

Speaker #1: Due to the strong growth in both mega we care and max care businesses in 1H26 and supported by gross margin expansion. The reported net profits in 1H26 were above 1.1 billion, as against 841 billion in 1H25.

Speaker #1: Reported net profits increased by 33.1% for reasons explained above. Operating cash flow for 1H26 was high above 848 billion, which represented 76% of reported net profit.

Francis Rego: Operating cash flow for 1H26 was THB 848 million, which represented 76% of reported net profit, with a lower cash conversion compared to earlier periods, primarily reflecting a planned increase in inventory levels to support anticipated demand in the upcoming quarters. In 1H26, THB 254 million was invested in tangible assets, mainly driven by spending towards manufacturing plants Indonesia, Vietnam, Thailand and Australia, and towards acquisition of 100% stake in the JV company with the objective of acquiring land in Myanmar for building manufacturing facilities in Myanmar. Moving forward to 2Q26 performance. Driven by high single-digit growth in Mega We Care business and continued improvement in the operating conditions of Myanmar, it resulted in double-digit growth in Maxxcare business. Overall revenue in 2Q26 was at THB 3.5 billion, which reflected a growth of 10.7% YOY.

Speaker #1: With the lower cash conversion compared to earlier periods, primarily reflecting a planned increase in inventory levels to support anticipated demand in the upcoming quarters.

Speaker #1: In 1H26, high above 254 million was invested in tangible assets, mainly driven by spending towards manufacturing plants in Indonesia, Vietnam, Thailand, and Australia, and towards acquisition of 100% stake in the JV company with the objective of acquiring land in Myanmar for building manufacturing facilities in Myanmar.

Speaker #1: Moving forward to 2Q26 performance, driven by high single-digit growth in mega we care business and continued improvement in the operating conditions of Myanmar, it resulted in double-digit growth in max care business.

Speaker #1: Overall revenue in 2Q26 was at above 3.5 billion, which reflected a growth of 10.7% YOY. Branch business revenue in 2Q26 was above 2.3 billion, reflecting a growth of 7.7% on YOY basis.

Francis Rego: Brand business revenue in 2Q26 was THB 2.3 billion, reflecting a growth of 7.7% on YOY basis. Again, underpinned by continuous strength of the strong product portfolio and sustained demand across key markets. Distribution business revenue in 2Q26 was at THB 1.07 billion, hosting a growth of 14.8% on YOY basis. Again, reflecting continued improvement in the operating conditions in Myanmar. Overall gross profits in 2Q26 improved to 51.7% of operating revenues as compared to 49.7% of operating revenue in 2Q25, primarily driven by improved margins in both businesses. The branded business gross margins remain healthy and improved to 64.4% in 2Q26, as against 62.5% in 2Q25. The gross margins of Mega We Care business are influenced by revenue growth, product mix, country mix, and level of output, amongst other factors.

Speaker #1: Again underpinned by continuous strength of the strong product portfolio and sustained demand across key markets. Distribution business revenue in 2Q26 was at above 1.07 billion, posting a growth of 14.8% on YOY basis.

Speaker #1: Again reflecting the operating conditions in Myanmar. Overall gross profits in 2Q26 improved to 51.7% of operating revenue, as compared to 49.7% of operating revenue in 2Q25, primarily driven by improved margins in both businesses.

Speaker #1: The branded business gross margins remained healthy and improved to 64.4% in 2Q26, as against 62.5% in 2Q25. The gross margins of mega we care business are influenced by revenue growth, product mix, country mix, and level of output, amongst other factors.

Speaker #1: The distribution business gross margins improved to 25.8% in 2Q26, as against 21.4% in 2Q25. The gross margins of distribution business are influenced by principal mix, amongst other factors.

Francis Rego: The distribution business gross margins improved to 25.8% in 2Q26, as against 21.4% in 2Q25. The gross margins of distribution business are influenced by principal mix, amongst other factors. SG&A expenses is about THB 1.23 billion, an increase of 15.6% on a YOY basis, reflecting planned higher spending to support continued growth of business. As a percentage of operating revenue, SG&A expenses increased to 35% in 2Q26 against 33.5% in 2Q25, reflecting the timing of SG&A spending, which is always not incurred evenly across different quarters. SG&A expenses are expected to resume back to normal levels on a full year basis and should taper down to around 32% to 33% of operating revenue on a full year basis.

Speaker #1: SG&A expenses were above 1.23 billion, an increase of 15.6% on a YOY basis. Reflecting planned higher spending to support continued growth of business. As a percentage of operating revenue, SG&A expenses increased to 35% in 2Q26, against 33.5% in 2Q25.

Speaker #1: Reflecting the timing of SG&A spending, which is always not incurred evenly across different quarters. SG&A expenses are expected to resume back to normal levels on the full-year basis and should taper down to around 32 to 33% of operating revenue on a full-year basis.

Speaker #1: EBITDA in 2Q26 came in at 745 million above as against 593 million above in 2Q25, an increase of 25.5% YOY, due to strong growth in both mega we care and max care businesses, supported by gross margin expansion.

Francis Rego: EBITDA in 2Q26 came in at THB 745 million as against THB 593 million in 2Q25, an increase of 25.5% YOY, due to strong growth in both Mega We Care and Maxxcare businesses, supported by gross margin expansion. The reported net profits in 2Q26 were about THB 515 million as against THB 391 million in 2Q25. The reported net profit increased by 31.6% YOY due to reasons explained earlier. To summarize, with strong double-digit growth in both Mega We Care and Maxxcare segments and margin expansion across both segments, the EBITDA and net profit has grown in strong double digits, which is as per guidance. As always, our balance sheet continues to remain a net cash balance sheet. May I now request our CEO, Mr. Vivek Dhawan, to share his remarks and guidance for 2026.

Speaker #1: The reported net profits in 2Q26 were above 515 million, as against 391 billion in 2Q25. The reported net profit increased by 31.6% YOY, due to reasons explained earlier.

Speaker #1: To summarize, with strong double-digit growth in both mega we care and max care, segments and margin expansion across both segments, the EBITDA and net profit has grown in strong double-digits, which is, as per guidance, and as always, our balance sheet continues to remain a net cash balance sheet.

Speaker #1: May I now request our CEO, Mr. Vivek Dhawan, to share his remarks and guidance for 2026.

Speaker #2: Thank you, Francis. สวัสดีครับ everybody. I'm Vivek here. I think Francis has given you a fair run of what's happened in the first half. And the last quarter, you've seen brands growing at a rate of 11.9% on an year-to-year basis.

Vivek Dhawan: Thank you, Francis. Everybody. I am Vivek here. Francis has given you a fair run of what has happened in the first half and the last quarter. You have seen brands growing at a rate of 11.9% on a year-to-year basis. Distribution also has picked up largely. Distribution is Myanmar and there has been growth with availability of stocks, et cetera, depending on the conditions. So distribution has also been seeing an uptick, at least not only in Myanmar, but other countries as well. Going forward, if you look at the future, we still see a healthy growth in our branded business as we have presented, and it should continue. Some low double-digit growth in the branded business. We expect that to carry on.

Speaker #2: And distribution also has picked up largely. You know, distribution is Myanmar, and there has been growth. With availability of stocks, etc., depending on the conditions.

Speaker #2: So distribution has also been seeing an uptick, at least in not only in Myanmar, but other countries as well. Going forward, if you look at the future, we still see a healthy growth in our branded business, as we have presented and it should continue.

Speaker #2: Some low double-digit growths in the branded business. We expect that to carry on. With the existing products, largely in hand, we have launched in the first half some 9 unique products, as we say, new, unique, not the same line extends and some 18 new products, unique products in the remaining period of 26.

Vivek Dhawan: With the existing product largely in hand, we have launched in the first half some nine unique products, and we say new, unique, not the same line extensions. We have a further plan to launch some 18 new unique products in the remaining period of 2026. Though the new products do not make up a very large part of our business, but they will create future opportunities going forward in the next few years to come. We have 80 products in pipeline, unique products, which we hope to launch over the next few years to come. Already launched in the past year, we launched some 18 new products in the last four years. So going forward, we have a new pipeline of over 100 products under development. So that has been our strategy in the drug area.

Speaker #2: Though the new products don't make up a very large part of our business, but they will create future opportunities going forward in the next few years to come.

Speaker #2: We have 80 products in pipeline, unique products, which we hope to launch over the next few years to come. Already launched in the past year, we have launched some 18 new products in the last 4 years.

Speaker #2: So going forward, we have a new pipeline of over 100 products under development. So that's been our strategy in the drug area, in the categories that we are involved in.

Speaker #2: We have a good pipeline to carry forward and build on the categories we are present in. And in the over-the-counter or in the supplement business, as we call consumer health business, we are expanding and growing the existing categories we are already there in present in.

Vivek Dhawan: In the category that we are involved in, we have a good pipeline to carry forward and build on the categories we are present in. In the over-the-counter or in the supplement business, as we call consumer health business, we are expanding and growing the existing categories we are already there and present in. So both these activities in the countries where we are present. Today, Southeast Asia is still the largest part of our business. Africa and Latin America are doing well. They have started to grow at much faster rates. We have presence in Africa and the larger markets, as you would know, are Nigeria, Ghana, Tanzania, Uganda, Kenya, Ethiopia. So they are the big ones, the other ones are small. So they constitute largely the main parts of the African business. Then we have Peru, Colombia that are also growing reasonably well.

Speaker #2: So both these activities in the countries where we are present today, we are Southeast Asia, still the largest part of our business. And Africa and Latin America are doing well.

Speaker #2: They have started to grow at much faster rates. We have present in Africa and the larger markets as you would know are Nigeria, Ghana, Tanzania, Uganda, Kenya, Ethiopia.

Speaker #2: So they are the big one. The other ones are small. So they constitute largely the main parts of the African business. And then we have Peru, Colombia, that are also growing reasonably well.

Speaker #2: And we continue to do business in Ukraine and Uzbekistan as well. Uzbekistan is new, and we are developing that market for the future. Southeast Asia is every market where we are present in all of them.

Vivek Dhawan: We continue to do business in Ukraine and Uzbekistan as well. Uzbekistan is new, and we are developing that market for the future. Southeast Asia is every market where we are present in all of them directly except Singapore, Brunei, and Laos. The rest we are also progressing very well with our plans. Our manufacturing plants, as you have been informed earlier, is Indonesia, where we have a plan to get to $50 million by 2030, is progressing well, both local manufacturing and imported product that we are bringing in to then later move to local manufacturing. Both these activities are ongoing. The plant expansion is nearly complete. We hope to start the warehouse next month, and the plant should be ready to go in Q1 of next year. That is the Indonesian plant. Vietnam, the plant building has started.

Speaker #2: Directly, except Singapore and Brunei and Laos. And the rest, we are also progressing very well with our plans. Our manufacturing plants, as you have been informed earlier, is Indonesia, where we have a plan to get to 50 million dollars by 2030, is progressing well, both local manufacturing and imported product that we are bringing in to then later move to local manufacturing.

Speaker #2: So both these activities are ongoing. The plant expansion is nearly complete. We hope to start the warehouse next month. And the plant should be ready to go the first quarter next year.

Speaker #2: So that's the Indonesian plan. Work has begun, and we hope to complete the plan on time. Projected plant completion time is 15 months plus the rest of the other things are GMP approval product, which is as known time frame.

Vivek Dhawan: Work has begun, and we hope to complete the plant on time. Projected plant completion time is 15 months, plus rest of the other things are GMP approval product, which has long timeframe. It is a three-year project, so it will take approximately three years' time before we see commercial production happening here. Meanwhile, in Myanmar, we have signed the agreement. The land deal signed, et cetera, has been done. Design is done, is in progress, and we hope also to begin construction in the next three months' time. We are planning that it should begin within three months' time. Everything else is on track. Manufacturing in Vietnam, Myanmar, Vietnam. Australia plant is progressing very well, and we continue to deliver for our brands from Australia and even supply the local market. That is the manufacturing side, product development side, and the countries that we are present in then.

Speaker #2: It's a 3-year project, so it will take approximately 3 years' time before we see commercial production happening. Meanwhile, in Myanmar, we have signed the agreement.

Speaker #2: The land deal sign, etc., has been done. Design is done, is in progress, and we hope also to begin construction in the next 3 months' time.

Speaker #2: We are planning that it should begin in the 3 months' time. So everything else is on track. Manufacturing in Myanmar, Vietnam, Australia plant is progressing very well, and we continue to deliver for our brands.

Speaker #2: From Australia and even supply the local market. So that's the manufacturing side, product development side. And the countries that we are present in, then looking at all these activities that are going on, we are on track to deliver as we have confirmed, explained to you our strategy in the last quarter.

Vivek Dhawan: Looking at all these activities that are going on, we are on track to deliver as we have confirmed, explained to you our strategy in the last quarter, that we plan to double our branded business, but over the next five years, by 2030, we are still on track to do so. We are working in that direction to make sure that happens. Overall, our business today, largely, I think that when you say complementary medicine, supplement nutraceuticals, our consumer health business is about 50%. You add over-the-counter self-medication, it probably becomes a bit bigger, about 65%. The remaining 30% to 40% is pure prescription, Rx prescription or pharmaceutical healthcare as Mega, we define it, pharmaceutical part. That is the ratio we are in. It will probably remain around that 50/50 in that range going forward.

Speaker #2: That we plan to double our branded business over the next 5 years by 2030. We are still on track to do so. And we are working in that direction to make sure that happens.

Speaker #2: Overall, our business today largely, I think that when you say complementary medicine, supplement, nutraceuticals or consumer health business is about 50%. You add over-the-counter self-medication is probably becomes a bit bigger, about 65%.

Speaker #2: The remaining 30 to 40% is pure prescription, Rx, Rx prescription, or pharmaceutical health care as Mega we define it, pharmaceutical products. So that's the ratio we are in.

Speaker #2: It will probably remain around there 50-50 in that range going forward. So that's the our branded business model, and distribution is largely 3 countries: Myanmar, Cambodia, and Vietnam.

Vivek Dhawan: That is our branded business model and distribution is largely three countries, Myanmar, Cambodia, and Vietnam. Cambodia still has continued problems as we have there, but I think the decline has now stabilized, and whatever had to come down has come down from the Thai product side because we also have a large range of product we are not only made in Thailand. We will continue to do business there, and I believe in the future things will look better in Cambodia. That is a situation everybody knows, and it is not beyond our control. That is the Cambodia situation. Other than that, I do not see any other serious issues to talk about at the moment. We remain confident that we will deliver our results for 2026. I would request if we can take questions and answer questions if there is nothing else.

Speaker #2: Cambodia has still has continued problems, as we have, but I think the decline has now stabilized, and whatever had to come down has come down from the Thai product side, because we also have a large range of product we are not only made in Thailand.

Speaker #2: So we will continue to do business there, and I believe in the future things will look better in Cambodia. But that's a situation everybody knows.

Speaker #2: And it's not beyond our control. That's the Cambodia situation. Other than that, I do not see any other serious issues to talk about at the moment.

Speaker #2: We remain confident that we'll deliver our results for 2026. Now, I would request that we can take questions and answer questions. So if you have questions, as we say, please tell us your name, your organization, and we'll try and answer all your questions as well as we can in the next 20-30 minutes that we have.

Vivek Dhawan: If you have questions, as we say, please tell us your name, your organization, and we will try and answer all your questions as well as we can in the next 20, 30 minutes that we have. Thank you. Over to you.

Speaker #2: Thank you. Over to you.

Speaker #1: What Vasu, you can ask your question, please.

Speaker #3: Thank you, Kunmanush. And thank you for the presentation. I have 2 questions. The first one is about the gross margin in 2027. Since Kunvivek mentioned that the new facility in Indonesia will be completed in the first quarter of next year, and it should take some time to ramp up the utilization of the new facility.

Manoj Gurbuxani: Vasu, you can ask your question, please.

[Analyst]: Thank you, Manoj, and thank you for the presentation. I have two questions. The first one is about the gross margin in 2027. Since Khun Vivek mentioned that the new facility in Indonesia will be completed in Q1 of next year, and it should take some time to ramp up the utilization of the new facility. My question is how much impact should we expect in terms of the negative impact on the gross margin for the branded business in 2027? That is my first question.

[Unknown Analyst]: Thank you, Manoj, and thank you for the presentation. I have two questions. The first one is about the gross margin in 2027. Since Khun Vivek mentioned that the new facility in Indonesia will be completed in Q1 of next year, and it should take some time to ramp up the utilization of the new facility. My question is how much impact should we expect in terms of the negative impact on the gross margin for the branded business in 2027? That is my first question.

Speaker #3: And my question is, like, how much impact should we expect in terms of the negative impact on the gross margin for the branded business in 2027?

Speaker #3: So that's my first question. Yeah.

Speaker #2: Impact on gross margin with the new facilities coming up, because they will be underutilized for some time. And that's going to be true for all our new facilities, because in the pharma business, you do have what we call a time to get approval, GMP, product registration.

Vivek Dhawan: Impact on gross margins with the new facilities coming up because they will be underutilized for some time. That is going to be true for all our new facilities because in the pharma business, you do have what we call a time to get approval, GMP product registration, they take time, and their full utilization takes anywhere between after approval to 2 to 3 years till they become. Operationally, because we are buying the same product from outside, there is no change in operational margins. But depreciation will be there. That will be number one, and there will be some pre-operative costs that we have to incur over the period while the production is low. But looking at the growth overall that we have from the branded business, that is also not all of it is being produced there locally, right?

Speaker #2: They take time, and they're fully utilization takes anywhere between after approval to 2 to 3 years. Will they become an operationally, because you are buying the same product from outside.

Speaker #2: There's no change in operational margin. But depreciation, depreciation will be there. That'll be number 1, and there'll be some pre-operative cost that we while the production is low.

Speaker #2: But looking at the growth overall that we have. And also all of it is being produced there locally, right? So growth in the branded business should take care of the additional operational expenses and still achieve that profitability that we have presented.

Vivek Dhawan: So growth in the branded business should take care of the additional operational expenses and still achieve that profitability that we have presented. We do not see the bottom line getting impacted, but depreciation definitely with these three sites coming in. You get 2 years of pre-operating expenses. From the time the plan gets ready and you get 2 years by then before you start your registration development batches GMP approvals, and you get your first launch. That is when actual production starts. The first 2, 3 years will be pre-operating expensive, that get amortized. Sorry, Manoj?

Speaker #2: So we do not see the bottom line getting impacted, but depreciation definitely with these 3 sides coming in. So you get 2 years of pre-operative expenses, right, from the time you the plant gets ready and you get 2 years by a time before you start registration, development batches, GMP approvals, and you get your first launch.

Speaker #2: So that's when actual production starts. So first 2-3 years will be pre-operative expenses. They'll get amortized. Sorry, Manoj?

Speaker #1: Yeah. And generally, we have been guiding gross margin in the range of 63 to 65% in that range. We should be remaining in that range.

Manoj Gurbuxani: Yeah. And generally, we have been guiding gross margin in the range of 63% to 65% in that range. We should be remaining in that range.

Speaker #1: In spite of Indonesian facility getting operational next year.

Vivek Dhawan: Yeah.

Manoj Gurbuxani: In spite of Indonesian facility getting operational next year.

Speaker #3: Okay. That's clear. Thank you. And my second question is regarding the quarterly trend of the SG&A expenses. Since in Q2, you mentioned that the jump in SG&A was largely due to the timing of the spending can I expect the SG&A to drop significantly Q on Q in Q3 before rising Q on Q in Q4 due to seasonal factors?

[Analyst]: Okay, that is clear. Thank you. And my second question is regarding the quarterly trend of the SG&A expenses. Since in Q2, you mentioned that the jump in SG&A was largely due to the timing of the spending. Can I expect the SG&A to drop significantly quarter-on-quarter in Q3 before rising quarter-on-quarter in Q4 due to seasonal factors?

[Unknown Analyst]: Okay, that is clear. Thank you. And my second question is regarding the quarterly trend of the SG&A expenses. Since in Q2, you mentioned that the jump in SG&A was largely due to the timing of the spending. Can I expect the SG&A to drop significantly quarter-on-quarter in Q3 before rising quarter-on-quarter in Q4 due to seasonal factors?

Speaker #2: I think the SG&A is related to a business and sometime if you have advertisements and things going on, some of this is prepaid or done like that.

Vivek Dhawan: I think the SG&A is related to a business. Sometimes if you have advertisements and things going on, some of this is pre-paid or done like that. I think overall, our SG&A is growing in line with our growth in the business, right? SG&A, sales team, sales cost, promotion expenses, all of these are in line with the sales growth. It is not very far away with growth in sales.

Speaker #2: But I think overall our SG&A is growing in line with our growth in the business, right? So SG&A sales team, sales cost, promotion expenses, all these are in line with the sales growth.

Speaker #2: It's not very far away with growth in sales.

Speaker #1: I think quarter to quarter might not always reflect a clear, you know, indication. I think on the full year basis, as we have mentioned, a little while earlier, we should be looking at around 32 to 33% of operating revenue as the SG&A for the full year.

Francis Rego: I think quarter to quarter might not always reflect a clear indication. I think on a full year basis, as we have mentioned a little while earlier, we should be looking at around 32% to 33% of operating revenue as the SG&A for the full year. Some quarters could be higher also.

Speaker #1: Some quarters could be higher also.

Speaker #2: And if it's at that rate, Kunvasu, the SG&A growth will be marginally lower than the revenue growth on a full year basis. So that's what we're expecting, the second.

Manoj Gurbuxani: At that rate, Khun Vasu, the SG&A growth will be marginally lower than the revenue growth on a full year basis. That is what we are expecting the H2 and the full year to look like. Thank you.

Speaker #2: Thank you.

Speaker #3: Okay. I want to make sure I heard you correctly, Kunmanush. You are saying that for the full year basis, SG&A should be growing at a slower pace than revenue?

[Analyst]: Okay. I want to make sure I heard you correctly, Khun Manoj. You are saying that for the full year basis, SG&A should be growing at a slower pace than revenue?

[Unknown Analyst]: Okay. I want to make sure I heard you correctly, Khun Manoj. You are saying that for the full year basis, SG&A should be growing at a slower pace than revenue?

Speaker #2: Yeah. So if the SG&A is at the rate of 32 to 33%, the growth in the SG&A expense on a YOI basis will be marginally lower than the growth in the revenue.

Manoj Gurbuxani: Yeah. If the SG&A is at the rate of 32% to 33%, the growth in the SG&A expense on a YOY basis will be marginally lower than the growth in the revenue. That is right.

Speaker #2: That's right.

Speaker #3: Okay. Thank you. That's clear. That's all my questions. Thank you.

[Analyst]: Okay. Thank you. That is clear. That is all my questions. Thank you.

[Unknown Analyst]: Okay. Thank you. That is clear. That is all my questions. Thank you.

Speaker #2: Kun Setapong, maybe request you. You can ask your questions, please.

Manoj Gurbuxani: Khun Settapong, may we request you? You can ask your questions, please.

Speaker #1: สวัสดีครับ I'm Setapong from Kasikorn. So I would like to ask about the mega recast. As the Southeast Asia still account about the around 70% of the mega recap revenue in the first half, but it still go about the 5% for the restate.

[Analyst] (KASIKORNBANK): I am Settapong from KASIKORNBANK. I would like to ask about the Mega We Care. As the Southeast Asia still account about around 70% of the Mega We Care revenue in H1, but it still grow about 5% for the restate. The other remainings, the incremental revenue, come from the other markets. My question is that for the Mega We Care to sustain the double-digit growth in H2 of this year, what needs the re-accelerate in the Southeast Asia? Could you quantify the expected growth range in the key countries and the product diver by the region?

Settaphong Sophonsirinun: I am Settapong from KASIKORNBANK. I would like to ask about the Mega We Care. As the Southeast Asia still account about around 70% of the Mega We Care revenue in H1, but it still grow about 5% for the restate. The other remainings, the incremental revenue, come from the other markets. My question is that for the Mega We Care to sustain the double-digit growth in H2 of this year, what needs the re-accelerate in the Southeast Asia? Could you quantify the expected growth range in the key countries and the product diver by the region?

Speaker #1: So the other remainings, the incremental revenue come from the other market. So my question is that for the mega recap to sustain the double-digit growth in the second half of this year, so what needs the re-accelerate in the Southeast Asia?

Speaker #1: And could you quantify the expected growth range and the key country and the product driver by the region?

Speaker #2: I think if you take away Cambodia, the Southeast Asia growth is in the range of 8%, 7.9, 8%, I think. So it's not very far away, 8%, and we're talking about higher single-digit, you know, mid low single double-digit growth.

Vivek Dhawan: I think if you take away Cambodia, the Southeast Asia growth is in the range of 8%, 7.9%, 8%, I think it is. It is not very far away, 8%, and we are talking about a higher single digit, mid, low single, double-digit growth. Africa, Latin America, some other countries are growing faster. We will see a little bit more growth in Southeast Asia as well in H2. There are many reasons. Southeast Asia, at the beginning here, you have Tet, you have this, you have holidays, you have a lot of other impacts in Southeast Asia, which does not happen in H2. H2, if you see historically also, what, 55, 45. There is a little bit more business in H2 in most year. We should see a little bit improvement in Southeast Asia as well.

Speaker #2: So Africa, Latin America, some other countries are growing faster than we will see a little bit more growth in Southeast Asia as well in the second half.

Speaker #2: Here, you have tech, you have this, you have holidays, you have a lot of other impacts in Southeast Asia, which doesn't happen in the second half.

Speaker #2: And second half, if you see historically also in what, 55, 45, so there's a little bit more business in the second half, most here.

Speaker #2: So we should see a little bit improvement in Southeast Asia as well. Plus the other markets continue if they continue to grow, we should be able to deliver that low double-digit growth in the second half.

Vivek Dhawan: Plus the other markets continuing, they continue to grow. We should be able to deliver that low double-digit growth in H2.

Speaker #1: Okay. All right. That's clear. Okay. Thank you very much, Kap.

[Analyst] (KASIKORNBANK): Okay. All right. That is clear. Okay. Thank you very much.

Settaphong Sophonsirinun: Okay. All right. That is clear. Okay. Thank you very much.

Speaker #2: Thank you. Yes, Mr. Andrew, you can go ahead with the question.

Vivek Dhawan: Thank you. Yes, Mr. Andrew, you can go ahead with the question.

Speaker #1: Mr. Andrew, you're on mute.

Manoj Gurbuxani: Mr. Andrew, you are on mute.

Speaker #4: Please. Yeah. Sorry. Let's get mute button off. Just want to clarify that comment. Did you say that overall you expect low double-digit growth for mega recap in the second half?

[Analyst]: Yes. Sorry. Managed to get the mute button off. Just want to clarify that comment. Did you say that overall you expect low double-digit growth for Mega We Care in H2?

[Unknown Analyst]: Yes. Sorry. Managed to get the mute button off. Just want to clarify that comment. Did you say that overall you expect low double-digit growth for Mega We Care in H2?

Speaker #1: Can we request the other participants to please mute themselves?

Manoj Gurbuxani: Can we request the other participants to please mute themselves?

Vivek Dhawan: That's

Speaker #4: Should I repeat the question?

Speaker #2: Yes, please. Yes, please.

Speaker #4: Sorry. You just said you expect overall low double-digit growth. Is that for mega recap, or overall for the second half? Is that just referring to Latin America and Africa?

[Analyst]: Should I repeat the question?

[Unknown Analyst]: Should I repeat the question?

Vivek Dhawan: Yes, please. Yes.

[Analyst]: Sorry, you just said you expect overall low double-digit growth. Is that for Mega We Care or overall for the H2?

[Unknown Analyst]: Sorry, you just said you expect overall low double-digit growth. Is that for Mega We Care or overall for the H2?

Speaker #2: Yes. Yes, correct. All across mega recap, branded business. We did 11.9% in the first half. We believe and we are confident that we should be in that 11, 10 to 12 percent range.

Vivek Dhawan: Yes.

[Analyst]: Is that just referring to Latin America and Africa?

[Unknown Analyst]: Is that just referring to Latin America and Africa?

Vivek Dhawan: Yes, that is correct. All across Mega We Care branded business. We did 11.9% in the H1. We believe and we are confident that we should be in that 11%, 10% to 12% range in the H2. Low double-digit growth, which is slightly higher than our plan for the branded business over the next five years. Yes, that is the plan, and it is coming from Africa, Latin America, and Southeast Asia being the three largest parts of our business.

Speaker #2: In the second half, it's low double-digit growth. Which is a slightly higher than our planned plan for the branded business over the next 5 years.

Speaker #2: But yes, that's the plan and it's coming from Africa, Latin America, and Southeast Asia.

Speaker #4: And I just wanted to expand on the Africa and Latin American bit in terms of what is obviously you've got very strong growth in the last quarter or two.

[Analyst]: I just wanted to expand on the Africa and Latin American bit in terms of what is driving. Obviously, you have very strong growth in the last quarter or 2. What is driving that?

[Unknown Analyst]: I just wanted to expand on the Africa and Latin American bit in terms of what is driving. Obviously, you have very strong growth in the last quarter or 2. What is driving that?

Speaker #4: What is driving that?

Speaker #2: I think it's both pharma and consumer health. Pharma is also growing strongly. We have a lot of products in the market and we are concentrating very heavily on consumer health, which we've been doing for a long time.

Vivek Dhawan: I think it is both pharma and consumer health. Pharma is also growing strongly. We have a lot of products in the market, and we are concentrating very heavily on consumer health, which we have been doing for a long time. We have built a Mega We Care brand. If you travel from Ghana, Accra, Kumasi, everywhere you go, you will find Cofend or Maxxgot, a lot of products that we have, Naspee. Among the other ones with UDCA, Livolin. So we have a large consumer health portfolio and a very nice tailored, not just the cheap antibiotics and other drugs in Africa. But we have also the newer drugs that we are bringing to the market and building a new category and creating new categories also in the African market. That is one.

Speaker #2: We have built a mega recap brand. If you travel from Ghana Accra Komasi everywhere you go, you'll find Gofen, Normada, a lot of products that we have that we among the other ones in UDCA, Levelin, so we have a large consumer health portfolio and a very nice tailored not just to cheap antibiotics and other drugs in Africa, but we have also the newer drugs that we are bringing to the market and building a new category.

Speaker #2: And creating new categories also in the African market. That's one Latin America also we continue in Peru, with new launches and going out and reaching out to new segments other than pharmacy.

Vivek Dhawan: Latin America also, we continue in Peru with new launches and going out and reaching out in new segments other than pharmacy. We have also started clinic and optometry business. So that is the doctor cabinets. So I think these are all different things that we are doing, expanding our, what do you call, area. Expanding the, not the territory, but expanding the segments that we are in and the target markets as well. Combined, we are seeing results in these because they were also at a low base. It takes time, really, in the country to build brands. So over time, as you continue doing it regularly, you see better results, and some terms do better than the others. So I think Africa is seeing better results.

Speaker #2: They've also started clinic and offering business. So that's the doctor cabinets. So I think these are all different things that we are doing expanding our what do you call area, expanding the not the territory, but expanding the segments that we are in and the target market as well.

Speaker #2: Combined, we are seeing results in these because they were also at a low base. It takes time when you're in the country to build brands.

Speaker #2: So over time, as you continue doing it regularly, you see better results and some terms do better than the others. So I think Africa is seeing a better result.

Speaker #2: Latin America anyway, if you look around the world, you see Latin America countries growth in the countries are better than most of the other regions.

Vivek Dhawan: Latin America, anywhere if you look around the world, you will see the Latin American stock market, Latin American countries, growth in the countries are better than most of the other regions. Latin overall is performing relatively better than other regions. Africa also after a downturn in the countries where we are, and Nigeria had a very bad run, but I think things have started to look better after they took some measures, austerity measures, and got the country on track a little bit with subsidies and oil and things like that. So it is a bit better than before, but still a long way to go. I think still a long way to go. There is still a lot of potential. We have a very long game in Africa. We think with the kind of population, there is 800 million over people in the territories we are in.

Speaker #2: So Latin overall is performing relatively better than other regions. Africa also, after a downturn, in the countries where we are and Nigeria had a very bad run, but I think things have started to look better after they took some measures and austerity measures and bought the country on track a little bit with no subsidies and oil and things like that.

Speaker #2: So it's a bit better than before, but still a long way to go. I think still a long way to go. There is still a lot of potential.

Speaker #2: We have a very long game in Africa. We think with the kind of population there is 800 million over people in the territories we are in.

Speaker #2: If things get better, mega and we can build the right brand, the next 5 years time, we should see a lot more happening from those territories.

Vivek Dhawan: If things get better in Mega and we can build the right brand, the next five years' time, we should see a lot more happening from those territories.

Speaker #4: Okay. And then just one last question for me. Just on Myanmar, itself, obviously the sales have picked up and the margins are I suppose at record highs.

[Analyst]: Okay. Just one last question from me. Just on Myanmar itself, obviously, the sales have picked up and the margins are, I suppose, at record highs. Is this down to, I suppose, competitors pulling out? Again, what is driving that, and is it sustainable?

[Unknown Analyst]: Okay. Just one last question from me. Just on Myanmar itself, obviously, the sales have picked up and the margins are, I suppose, at record highs. Is this down to, I suppose, competitors pulling out? Again, what is driving that, and is it sustainable?

Speaker #4: Is this down to, I suppose, competitors pulling out? What again, what is driving that? And is it sustainable?

Speaker #2: I think in the distribution business, it's a product mix that depends on which principles we handle, where we have stocks for. But the average it doesn't vary over the years.

Vivek Dhawan: I think in the distribution business, it's a product mix. Depends on which principles we handle, where we have stocks for. But the average, it doesn't vary over the years. I think we are in the same, the 20 to-

Speaker #2: I think we are in the same 20 to 25. So in that range. So this quarter maybe a little bit better but yeah, with the availability, funds availability is pharma.

Francis Rego: 20% to 25%

Vivek Dhawan: 25%. So in that range. This quarter may be a little bit better. With the availability, funds availability gets better, you get it, and you can import product, where largely it is pharma, majority. Consumer health is a little bit not as easy. Plus also, you have local principals there who are locally producing, and we are handling them as well. So that is also helping distribution. Pure pharma, some licenses for pure pharmaceuticals have improved. That also increased distribution. So with that happening, I think we are seeing some growth in distribution, and the margins are better. When we are importing and doing it from here, then the margins are different. If you are buying locally or some companies have started local production as well, so that is also. You have some local partners as well in the country where we offer service. So that is the distribution side.

Speaker #2: Majority consumer health is a little bit not as easier. Plus also you've got local principles there who are locally producing and we're handling them as well.

Speaker #2: So that's also helping a distribution A, B pharma some licenses for pure pharmaceuticals have improved. That also increased distribution. So with that happening, I think we're seeing some growth in distribution.

Speaker #2: And the margins are better. When we are importing and doing from here, then the margins are a different thing. We're buying locally. Some companies have started local production as well.

Speaker #2: So that's also you've got some local partners as well in the country where we offer services. So that's the distribution side. Branded again, availability and products that we have, our products are old established and have been around for a while.

Vivek Dhawan: Branded, again, availability and products that we have, our products are old, established, and have been around for a while. With that, if you see quarter to quarter, if there are stocks available, Burma does better because there is still demand. Demand hasn't grown because as a country, GDP hasn't grown. Source of income hasn't grown. So all this has put pressure in real growth, but there is still demand in that population. There, where Mega is present. We still continue to, if we can get stocks, we can still continue to deliver.

Speaker #2: So with that, if you see quarter to quarter, if there's a stocks available, Verma does better because there is still demand I mean, demand hasn't grown because as a country, GDP hasn't grown.

Speaker #2: Source of income hasn't grown. So all this has put pressure in real growth, but there is still demand that population there where mega is present.

Speaker #2: So and we still continue to if we can get stocks, we can still continue to deliver that's where you're seeing growth.

Speaker #4: Okay. Thanks.

[Analyst]: Okay. Thank you.

[Unknown Analyst]: Okay. Thank you.

Speaker #3: Do we have any other questions? So if there are no other questions, then we would like to thank each one of you and those just call in case you have any other questions please feel free to contact myself, Kun Manoj, or Kun Sujantana.

Vivek Dhawan: That is why you are seeing growth in Myanmar.

[Analyst]: Okay. Thanks.

[Unknown Analyst]: Okay. Thanks.

Francis Rego: Do we have any other questions? If there are no other questions, then we would like to thank each one of you and close this call. In case you have any other questions, please feel free to contact myself, Khun Manoj, or Khun Sujinthana, and we will be more than happy to answer your questions after this call. Anytime you can call us. Thank you everyone. Thanks a lot for joining today's call.

Speaker #3: And we'll be more than happy to answer your questions. After this call, anytime you can call us. So thank you everyone. Thanks a lot for joining today's call.

Vivek Dhawan: Thank you.