Laxmi Dental (NSE:LAXMIDENTL) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Laxmi Dental Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will remain in a listen only mode, and there will be an opportunity for you to ask questions after the management's opening remarks. Please note that this conference is being recorded. Before we begin, a brief disclaimer. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on the date of this call. These statements are not the guarantee of future performance of the company, and it may involve risks and uncertainties that are difficult to predict.

0:51 I will now hand the conference over to Mr. Sameer Merchant, Managing Director and CEO. Thank you, and over to you, sir. Thank you. Good morning, everyone. A warm welcome to all of you, and thank you for joining our earnings call. On this call, we are joined by our CFO, Mr. Dharmesh Ghatani and Strategic Growth Advisors, our Investor Relation Advisors. The results and the presentation are uploaded on the stock exchange and company website. I hope everybody has had a chance to look at them. I'm pleased to share that Q1 FY 'twenty seven was a strong quarter for us with broad based growth across our Dental Laboratory and aligner solutions, providing a healthy start to the year.

1:44 Our revenue for Q1 FY 'twenty seven stood at approximately INR 75 crore, registering a Y o Y growth of 13.9%. This was our highest ever quarterly revenue. During the quarter, we witnessed a healthy improvement in profitability, largely driven by a favorable product mix. EBITDA grew by 20.6% Y o Y with margins improving to 19.2, while PAT increased by 23.8% Y o Y with margins standing at 13.8%. Coming to our segmental performance, our Dental Lab business delivered another strong quarter with revenue growing at 23.5% Y o Y, driven by healthy performance across both domestic and international market.

2:38 Notably, the international business registered an impressive growth of 37.4% year on year. This momentum reflects the strong relationship and market presence we have built across global markets over the years. We are also looking forward to participating in the International Dental Show towards the end of the fiscal year. The IDS, known as the International Dental Show, is one of the world's premier dental exhibitions, which happens every two years, which provides an excellent platform to showcase our products to dental laboratories, companies and distributors from across the globe. It is also a great learning platform where we get to explore new technologies and innovative products that can be added to our portfolio.

3:29 It is one of the few activities that helps us build better networks in the international markets. I would also like to highlight that we have recently appointed a new CEO to head our USA business. Based in The USA, he brings over thirty two years of experience in medical devices and dental industry. His appointment will strengthen our on ground leadership, enable a more market focused strategy tailored towards The U. S. Region and support the continued scaling in one of our key international markets. Our Aligner Solutions business also delivered another strong quarter, recording a healthy 28.6% year on year growth. With this segment, BISDENT grew by 27.8% year on year, while WIDIA registered a 29.3% year on year increase.

4:24 These numbers reflect the effectiveness of our strategy for delivering sustainable and profitable growth. Such strong performance across all segments is attributed to our sustained efforts of our sales and ops team. Supported by initiatives such as scanner deployment in the past, promotional activities, training programs, participation in dental events and ongoing AI related projects. Industry wide, we see strong adoption of scanners in line with global trends. We continuously evaluate our scanner road map in line with technological advancements and innovations showcased at leading global dental exhibitions. Our pediatric dental business, Kizzy Dental, continued its strong growth trajectory, delivering an impressive 54.4% year on year growth during this quarter as the business is steadily scaling up.

5:25 In FY 'twenty seven, we plan to make investments towards the addition of new machinery to modernize and expand the capacity of our manufacturing capabilities. These investments are aimed at supporting long term growth while enhancing operational efficiencies across our business segments. We have also executed a letter of intent to acquire a new land situated in Paladhar, Maharashtra. This is towards transitioning from a currently leased premises to a newly owned facility, which will enable us to improve the workflow efficiency and better control the cost structure. Further, it will also support the future scalability of our business.

6:13 We will share further updates on this matter as and when there is progress. Going forward, we continue to execute our strategy centered around expanding our market reach, driving product innovation, accelerating digitalization and building a trusted and a well recognized brand in the dental industry. With this, we remain confident in delivering sustainable and long term profitable growth. I will now hand it over to our CFO, Mr. Darmesh Dattani to take it forward. Thank you. You, Dharmesh. Thank you, Dharmesh. Let me give a glance at our consolidated financial performance during Q1 FY 'twenty seven. Revenue from operations stood at INR 74.7 crore as compared to INR 65.6 crore in Q1 FY 'twenty six, marking highest ever quarterly revenue for the company.

7:10 Gross profit stood at INR 58.7 crore, registering a 22.1% Y o Y growth. Gross margin improved and stood at 78.6 percentage. Employee cost stood at INR 28.4 crore with a sequential increase of 6.2 percentage. This increase was primarily due to the appointment of a new CEO for The USA business and also due to some addition of employees across sales and other key important areas. Lease of expenses for the quarter stood at 83 lakhs. Other expenses increased to INR 15.9 crore from INR 12.5 crore in the same period last year, largely driven by higher freight costs, ECL solutions and investment in AI led automation initiatives, which are aimed at enabling greater efficiency and scalability going forward.

8:06 EBITDA stood at INR 14.4 crore, which is our highest ever quarterly EBITDA, registering a 20.6% Y o Y growth. EBITDA margin stood at 19.2 percentage in Q1 FY 'twenty seven. For better comparability, one can look at the adjusted EBITDA, which includes recorded EBITDA, 60% of QC Dental PAT, 49% of IDBG, AI Dent PAT and ease of expenses. This stood at INR 16 crore as against INR 14.8 crore in the same period last year. Finance costs for the quarter stood at INR 0.3 crore as the company remains debt free. Profit after tax for the quarter stood at INR 10.3 crore, registering a 23.8 percentage Y o Y growth.

8:53 Pet margins remained healthy at 13.8 percentage. With this, we conclude our opening remarks and open the floor for Q and A. Thank you. Thank you. Ladies and gentlemen, we will now begin the question and answer session. You may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Meet Mehta from Prasoon ExponentL.

9:49 Congratulations for the great set of numbers. Am I audible? Thank you so much. Hello? Yes. Am I audible now? Yes, person, you are. Thank you. Okay. Okay. So my first question to you is, we don't have some exclusive tie ups with the dentists. So what is after what makes the customer choose dental... Laxmi Dental product after using the iScan Pro scanner? So what differentiates it from the other products which the the dentists have the option? That is my first question. Should I go with others or one by one? Let's go one by one. I think it'll be easier if we go one Okay. By Okay. No problem. Yes.

10:42 So coming to your question of why, I mean, we've been doing this since thirty six years. So trust is an important factor. So for any dentist choosing dental prosthesis for a patient, first question is the trust partner. Do they trust the partner? And that we have built time and credibility factor. So which is when they want to send business to us, they know that we've been existing since thirty six years, and they can trust the products. And there are dentists who have placed crowns thirty six years back. So there's a history of that trust. Number two, in terms of quality standards. Now as an international company selling not just in India worldwide, our quality standards are global. So when they choose a product, they know the material that we use, the processes that we use, the systems that we have in terms of ISO or quality management system, all are in place for them to get consistency when they are asking for any dental restoration.

11:39 And then there are more parts of how we innovate, give them better quality product in terms of our systems, processes, technology. So there are many factors, but I gave you one, two or three factors for them to choose us. And we have had history of they have chosen us. And even in the future, we have innovation, products, processes, branding as well, where we are the only branded player in the crown category. So these are a lot of parameters for them to make that decision. Okay. Understood. And my second question was on the scanner. So what is the margin that you make on a gross level? And I think because of that, your margins can be a bit lumpy. So how should we look forward about it?

12:29 So even I would say on a scanner, see, it's a trading item. So it will always have a normal trading margin of 15% to 20%, which usually any trading item would have. Now if you see our margin, in fact, what we have been able to achieve at 19.2% as compared to last quarter, which was around 15%. And even if Y o Y, it was at 18%. So we have only improved our margins. And moving forward, we feel the mix will drive the margin in a good way. And excluding if you exclude the scanner, so I would say if you want to look at stable margins, just exclude the scanner and you will see the margins are stable and they are rising. With the scanner, it can happen that you will see minor fluctuations, but that is part and parcel of a business where we want to enable digital dentistry for long term growth of the organization.

13:24 Okay. And what is the current capacity for lab business and the alliance? So what is the utilization both? It's a little complex to measure because it's very custom made. Every crown is different. But although whatever best case scenario that we are measuring, the aligner has reasonable capacity to grow. I would say it is somewhere close to around 70% in terms of capacity utilization. And the lab is probably slightly higher because it's more complex, more custom. Aligner still has a lot of automation involved. The lab has lesser automation than aligners, and that's why we are working towards automation and digitization.

14:11 So on the lab part, I would say we are always on a constant threshold of like 90%, 95% because it's so custom. It's very, very custom. Every prosthesis is designed differently, is manufactured in a custom manner. So it's a little complex, but I hope I gave you a perspective. Right, right. And my last question is what is currently the digital penetration among your network as of now? So we are currently, I would say, in the range of it varies month on month, but I would say probably between 75 to 80% in domestic. Internationally, it's majority digital. But domestic, I would say we are in that range, combining our dental lab and aligner business.

14:59 Okay. So as we reach towards more and more digital networks, so do you expect the scanner revenue going down? Means, I see, again, scanner is a little complex here. So we have done well in the scanner. And I would say moving forward also, we are keeping our eyes and ear open to see how the scanner business shapes up. But the industry is adopting scanners for sure. So today, I would say we are estimating it at around maybe 7% or maybe touching 8% right now. So there's a lot of headroom for the scanner to come in and digitization to happen. But we have to see when that J curve starts happening. So I would say for right now, there is a good demand, but we have to see how it moves further.

15:49 Okay. And what is the cost per scanner approximate? Like I told you, so currently, we are charging about 3 lakhs at an average for scanners to a dentist. Okay. Okay. Understood. Yeah. Okay. Thank you. That's it from us. Thank you so much. Thanks a lot. Thank you. We take the next question from the line of Ankit Ajalan from Goldman Sachs. Please go ahead. Am I audible? Yes. You're a little slow, Ankit, but yes. Yes. Is this better? Is this better? Slightly better. Yes. Just a couple of things. One is on this land parcel that you've acquired, what exactly is this for?

16:40 So it is so currently, our domestic facilities are rented both for the illusion dental lab and for aligners, and they are two separate locations. So the goal is to move away from rent and build a unified facility, which can lead to operational efficiency and decreasing the rent. So currently, we are almost paying close to INR 2 crores worth of rent just for these two properties. And now as yes, per year, as it's expanding, people are expecting a raise on the rental as well. So we thought, I think it's a good time for us to do something where we can have our own property. So it gives us room for expansion. We can build almost 3x the size of what we are currently paying. So if we need to go 3x, it will end up at maybe INR 5 crores, 6 crores of just rent in the future.

17:29 Instead of that, we can build it in a much more leaner manner and have the option to scale as well. Okay. And in terms of, let's say, disruption, then are you going to give up to the factories that are currently operating and then move to this one? Or So that's the plan. Yes, that's so the two facilities are rented that we have. The plan is to let go of those and transition it to the newer facility so that the rental goes up. Okay. And what could be like the disruption in that transition period? I don't see any disruption. See, the best part is because we are digital, it's much easier to make a moment today than to pay back. If this was five years back, probably more complicated. But because the technology is available right now, and we will do it in a very phased transition manner. It's not that we are going to create any disruptions in revenue or productivity while making this transition.

18:26 Even our export business also, we initially was within the Mumbai. It in Kandi Valley. It was in Kandi Valley. And we transitioned it to Boisar at a COVID period, which was 2020. So and it was, I mean, a smooth transition for us. Okay. All right. And just a couple of more questions. One is on the domestic labs business. What's happening? I mean, growth continues to be slightly slower. I mean, they're growing at about 12% exoscanners this year. Yes. This quarter, Y o Y, it's 12%. But if you see our messaging, we have added satellite labs, which so we are much closer to the customer. And we only see the momentum upwards from here. I don't think we are going to be in that range.

19:15 We will start growing faster in the domestic lab category in the coming quarters. Okay. Okay. And just one last two things, okay? So there was one was on the employee expenses and on the other expenses. So on the new CEO that you've hired for the U. S. Business, is it because you're seeing traction? Is this you have a lead indicator and because of which you hired a U. S. CEO? Or is this a business that you're trying to expand and then for that purposes, you've hired? And second is, can you please expand a little bit more on the AI led automation expenses that you've outlined here? Sure. So on the CEO part, definitely, he has been or was in dental for last eleven years. So he has that connect.

20:03 And we have certain things which could really shape up extremely well in couple of quarters with him. On the detailing part, maybe I'll prefer one on one when we can spend some time to give you of how and what are the things that CEO brings to the table instead of on And the earnings towards the other part of expenses on AI led, where so we are doing a lot of AI grounds already in beta AI models. So there is some cost, which is initial, which is coming in, which is slightly higher. But as we scale this up, the cost will become much better. So probably a little bit for this year, but I think moving next year, the cost will be there. I would say much lesser than what it is right now. But at the same time, if you see, actually, we have been able to grow our margin from 18% to 19.2%.

20:54 And we see that I think we are in a position to keep maintaining this or go higher as we move along throughout the year. Yes. That's it. Thank you so much. Great. Thanks a lot. Thank you. We take the next question from the line of Dushar Manudhani from Motilal Oathwal Financial Services Limited. Please go ahead. Yes. Thanks for the opportunity. So just on the international business side, if you could share how much has been the constant currency growth and how much has been the benefit of currency? So over the period of time, USD has almost increased from 85 to 95.

21:40 So close to about 12 percentage kind of the change in the USD over the Y o Y basis. Simultaneously, our current business from the DSOs and the other existing retail businesses also increased. So Sorry, sir, your voice cracked. So what you're trying to say is there has been an uptick in, say, on a Y o Y side in terms of dollar. But even if it's approximately 10, we have grown the business by almost 37%, the international. So it is... No, no, but yes, I mean, fair point. So absolutely not taking away the constant currency growth. And just trying to understand that this benefit would continue for the coming quarters as well?

22:32 They're in place because we have to see how the USD has gone up from Q1 last year to Q1 this year and then Q2 what was the price Q2 what will be the price, we don't know. So we feel there may be some arbitrage, but we are still seeing very strong growth internationally. Got it, sir. So secondly, the aligner business has picked up really well with very decent growth shown for the quarter. What is it that is driving this? And how sustainable that is? So we have done some good initiatives on aligner with education, training, the iScope that we launched, which can do aligner monitoring at home that has given a lot of impetus to the business. We are also launching two, three more things as we speak in the next few quarters.

23:21 So we don't see any issue in sustaining the growth. We feel we should be able to keep the growth momentum going. Got it. While you elaborated on this point, but still trying to understand that what are the scanners which we would have sort of sold to the dentist community earlier, typically how much time it would take to convert that to business and should reflect into better growth in domestic sales? So I would say usually there is a gestation where we have seen say between six months to a year in some scenario, maybe say, year and half as well. So what we have started seeing the trend of 12 growth, we feel that coming, I would say, towards the next three quarters, Q2, Q3 and Q4, we should only see it going upward in terms of growth trajectory as they mature more and more.

24:24 Got it, sir. Thanks. That's it from me. Thank you. Thank you, Vishal. Thank you. We take the next question from the line of Priya Kulkarni from Centimeters Capital. Am I audible? Yes. Please go ahead. Yes. Thanks for this opportunity, sir. So I would like to ask that how do you expect to grow the domestic dental business at a faster rate going ahead? Like, what is the strategy on that front? Priya, so there are multiple things. I think we've been constantly pushing the envelope with our scanners in terms of growth.

25:14 And I think we are now hitting some maturity in terms of growing the domestic lab business, where we have seen in this Q1 12%. And like I said in the previous question, which was asked, we only see that things should go upwards from here towards Q2, Q3 and Q4. Okay, sir. Understood. Also, sir, would you like like I would also like to understand what is the competitive scenario on the NII business? I think it's still there. It was there before. It is right now, and I don't expect it to go away from the future. But we, as an organization, will keep innovating, will keep making sure we utilize our experience of building the dental business since last thirty six years and cross sell to a lot of our customers who are already giving us different aspects of our business.

26:08 So mean it's there, like to discuss on competition today, like we did it for a couple of times, but then you will devise counter strategies to grow your own business, and that's what we have shown. Right. Right, sir. That answers my question. Thank you. All the best. Thank you. Thank We take the next question from the line of Hithvi Songvi from HS Investments. Please go ahead. Hi, good morning. I just wanted to have an idea on this. Have you added any new international geography during the quarter? Yes. So we always constantly repeat the goal is to keep exploring newer countries across the world. So yes, we have.

27:05 And probably every quarter, we have a few countries which get added on to the pilot phase, and then they go on to the next phase, and then eventually, they start business. Got it. And also, I just wanted to have an idea on Align for Align, think that key target general dentist or orthodontist? And are we also looking at B2C opportunity here? So to coming to your question, B2C, absolutely no. We are not selling aligners to patients directly, neither we intend to do so in the future as well. Our goal or our strategy is to go through the dentist. And in that, for us, all dentists are same, whether it's orthodontist, general dentist, there is periodontist, there is endodontist.

27:56 Basically, if they are dentists, we have orthodontists in house. We have orthodontists on field who are our so called advisers or part of team members where they support a dentist if they need help. So we go through only dentists, and we do not segregate much between an orthodontist and a general dentist. Because if you see internationally, even globally as well, there's a lot of revenue now coming in from general dentists worldwide, not just in India, but across the world as the aligners are becoming more, say, I would say, option for patients, it is getting simpler because a lot of companies like us are driving education towards the dentist and the dentists are experiencing how they do aligners and getting more and more confident about delivering it.

28:48 Got it. Got it. Yes, that answers my question. Thank you so much for the opportunity. Thank you, Hetvi. Thank you. We take the next question from the line of Ankit Jalal from Goldman Sachs. Please go ahead. Hi. Thank you for taking my question again. So I just want to understand on scanners, what is strategy going forward terms of how much are you planning to deploy for the current year? So current year, based on last estimate, we had thought that we should be able to again deploy about 800 to 1,000 in this financial year.

29:37 And like I said before, we are looking at the technology, looking at the scanners demand, the scanner adoption every day as we speak. So we are still we still feel that we should be on track to do that in this year. Okay. And so in terms of gross margins, then should we expect gross margins to be similar to what we had in 1Q or... Yes, yes, think absolutely. So again, now when you say gross margin, when the scanner mix changes, there is always a slight change. Apart from scanner, the margin should remain stable. But if we have like a very strong quarter in terms of scanner, we will see there is a dip in the gross margin because this channel is sold at, say, 20% margin.

30:23 So 80% is our cost. But then that adds the future like we are seeing with the aligners right now, and dental has started again two digit momentum in terms of growth. So it will keep continuing that momentum for future years as well. Okay. Would you like to give some direction in terms of guidance in terms of, let's say, EBITDA or I think Yes. In So on the aspiration side, so we had said that on the revenue side, 15% to 20% growth. And on the margin side, 18% to 20% is the goal. And we have done that in the past. Last year, were a lot of situation because of which we were at about 15.6%.

31:10 The labor code came into picture, a lot of tariffs came into picture, then a big amount of ESOP cost came into picture. But now ESOP is now pretty normal units, almost half of what it was last year. So we feel we should be in that range. Okay. Okay. Okay. That's it. Thank you so much. Perfect. Thank you. Thank you. We take the next question from the line of Lishikesh Raj Singh, an individual investor. Go ahead. Good morning. My question is on the price actually. Lishikesh, your audio is not clear. Could you please use your handset?

32:02 Is it better now? Yes, much better. Okay. So my question is on the price. I actually bought Laxmi Dental shares in January 2025 at around INR 500. Currently, it's INR 200. So yesterday, was very eagerly waiting for the results. When I saw the results, my personal opinion was this was great result. I was looking forward to a great upside moment this morning, but disappointingly it has gone down. So what is it that we are missing here? And what is it the market is trying to tell us? Now again, Rishikesh, I wish I had an answer, which I could give you, but this is not in our hands. What is in our hands today is to perform. Like you said, it's a great result. We believe that we did very well for Q1. Correct. Our margins improved. Our revenue is this is the best quarter that we have ever had.

32:52 In terms of profitability, we are at 19.2%. So the controllables are with us in terms of performance. And what we are doing since last thirty six years as management, we will keep working hard, keep doing good for the business. Apart from that, very hard for us to control anything which is what is happening externally. In fact, if you see, we had and this is public news, we had actually purchased shares when the pricing was somewhere in the range of, I think, 200. We actually bought shares. So we still believe. And whenever time comes in the future, when we have liquidity, we will keep buying. So we are very bullish, positive about what we have created. And if you see the dental awareness in India or anywhere in the world, it's not going down. The awareness is only going up.

33:38 So for us, the next five, ten years are we are so excited about what next five or ten years brings to dentistry for us, not just in India, but across the world. And that is why we are trying to control our controllables, which is to perform. Like you saw the numbers, we have had congratulation messages. So it's even hard for us to understand why is this happening. But all we can do, and I can assure you that we will keep trying our best and we'll keep performing with our abilities. Okay. Thank you. Thank you, sir. Thank you. We take the next question from the line of Devanshi Shah from HUF Capital.

34:29 Hi. Thank you for the opportunity. Sir, I wanted to understand, sir, what initiatives are you taking for building a brand in the dental industry? Devanshi. Thank you so much. I'm so happy to hear that question about branding in dentistry. So what we have done is we have got brand ambassadors on board. We are doing a lot of in clinic branding. We are advertising on social media and a lot of other channels where we are trying to educate a patient to ask your dentist about the right kind of restoration. So those are a lot of initiatives that we are doing. I think branding is important because today, when I meet a lot of people, I say, what is it that we pick without a brand? Anything on a body inside our body when we have to pick something, we are picking up with a brand.

35:19 Whether it's as small as a bottle of water, which is costing us INR 10 or anything which is very, very expensive, we are always looking for a brand. So dentistry, I think, deserves the brand. We have started first. So that's why it's tougher, but we like doing tougher things. And we are very, very positive that branding is a long term play. And eventually, in the next three, four, five, seven, ten years, branding will become one of the biggest differentiator of a patient and a dentist who are choosing a dental product. Definitely, sir. Got it, sir. Thank you. Thank you so much. Thank you. We take the next question from the line of Achat from Laxmi Dental Research.

36:05 Please go ahead. I want to understand, I mean, if we see non debit, alumina business is growing at almost 30% CAGR, I mean, the entire industry. And if I see your breakdown, you have also mentioned that you have grown 29% year on year from 185,000,000 to $238,000,000 So I want to understand if in the future, you just planning to grow the industry CAGR or you want to outgrow exponentially in the long Thank you for your question. I think always, as market leaders, the goal that we have is to grow beyond the industry. So it is not that we want to grow with the industry, and we are putting in a lot of efforts in terms of how we can grow, whether it's the branding that we did with Karina Kapoor as a brand ambassador, whether it's aligner education or whether it's training to the dentist or whether it's social media marketing towards the patients. So the efforts and initiatives are there.

37:07 And I'm sure in the future, we will see good results in the next three to five years, we should be able to bring a very, very strong line of brand in the country. And what about the ratio, sir? Like I've seen currently the majority of the revenue is coming from the laboratory offerings. So in the long term, where do you want to focus more, sir? Do you want to scale another solution? Or do you want to focus more on laboratory offerings? I think it's important for us to see Laxmi Dental as a holistic company and not break it down too much because in the end, we are working with dentists who are our customers. So if the dentist has today more dental lab business and lesser aligner business, maybe the mix would be similar. In the future, if aligner really explodes, which it has done in many countries, if a dentist start doing more aligner cases, then probably that mix will change. But for us, we look at it from a holistic viewpoint where dentist is our person where we get revenue from, whether it's the revenue for dental lab, whether it's the revenue for aligner or any other product. That is how we look at it.

38:20 Okay, sir. Thank you. Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for their closing comments. Thank you so much. With this, we conclude the call. If you have any further queries, please contact SGA, our Investor Relationships Advisor. Thank you, everyone, for joining us today on this earning call. Thank you. Thank you. On behalf of Laxmi Dental Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.