Mega Lifesciences Public Company Limited (MEGA) Earnings Call Transcript & Summary

Good afternoon, everybody, I'm Vivek from Mega Lifesciences. We have with us our colleagues; Francis, he'll take you through the financials; Manoj, Deputy CFO, all are sitting in front. Our team is here from Mega, who'll run you through the performance for the full year, whole year and then [indiscernible] we start -- so thank you, started, [indiscernible]. Nobody else is joining. Francis over to you.

I'll start the session with a brief synopsis of the FY '23 performance. Overall revenue in FY '23 was at about THB 15.68 billion, flat on a Y-o-Y basis. We have been able to maintain the high revenue base of FY '22, as guided at the start of the year. Brands revenue in FY '23 was about THB 8 billion, flat on a Y-o-Y basis. Mega We Care revenue for FY '22 grew at a high rate of 16.6%. Given the high growth rate of 35% achieved over 2 years, FY '21 and '22, in FY '23, we have been able to maintain the higher revenue base of FY '22, as we had guided at the start of the year. Post pandemic, despite the revenue from COVID-friendly products tapering down from the high base of '22 and dropping significantly, the revenue from other category of products have shown growth, which shows the resilience of the company and the strength of strong product pipeline because of which we were able to maintain the high base in FY '23. Distribution business revenue in FY '23 declined by 5.5% on an adjusted basis, as we have guided at the start of the year. The decline in Maxxcare revenue is mostly attributable to the loss of one principal in Myanmar, as we had guided. Overall, in terms of revenue, we have been able to maintain the high revenue base of FY '22, despite the decline of COVID-friendly products. Overall gross profit in FY '23 remains stable at 45% of operating revenue. Branded business gross margins held steady at a healthy level of 65% in FY '23, as guided earlier. Distribution business gross margins improved to 23.1% on an adjusted basis, as against 20.1% in FY '22. Gross margins of Distribution business have improved partly, due to the exit of one principal in Myanmar, which has relatively lower gross margin. Gross margins are also influenced by [ principle ] mix, amongst other factors. SG&A expenses in FY '23 proved to 26.7% of operating revenue, as compared to 27.8% in FY '22. Adjusted net profits in FY '23 were steady at THB 2.3 billion, as against THB 2.3 billion in FY '22, as guided at the start of the year. Given the high growth rate of 60% which was achieved over 2 years, FY '21 and FY '22, in FY '23, we have been able to maintain the high base of FY '22. Adjustments to net profits are made for ForEx gains and losses, which includes a significant onetime FX loss from Nigeria and other items of income or expenses and losses from newly started business. Reported net profits in FY '23 at THB 1.99 billion, as against THB 2.24 billion in FY '22, reflecting a decline of 11% Y-o-Y. The decline mainly arising from the one-time impact of ForEx loss due to the depreciation of Nigerian Naira against the dollar in FY '23. Operating cash flows in FY '23 were healthy at THB 1.9 billion, representing 97% of the profit, which again demonstrates the strength and resilience of the company's operations. We continue to be a net cash company with a strong balance sheet. On the CapEx front, we have spent THB 290 million, towards CapEx in FY '23, with majority spending towards consolidation of manufacturing operations and capacity expansion in Thailand, Indonesia and Australia as guided. On the new product side, we have launched 15 new unique products in FY '23, 3 products from the Neutra side and 12 products from the Prescription side. Moving forward to 4Q '23 performance, overall revenue for 4Q '23 was about THB 4.1 billion, up by 7% Y-o-Y, driven by both Mega We Care and Maxxcare business. Brands revenue in 4Q '23 was by THB 2.1 billion, up by 3.1% Y-o-Y. Distribution business was up by 9% on an adjusted basis. Overall gross profits in 4Q '23 remained stable at 46% of operating revenue. Branded business gross margins held steady at a healthy level of 64.3% in 4Q '23, as against 65.3% in 4Q '22, as we have guided earlier. Distribution business gross margins improved to 25% in 4Q '23, on an adjusted basis, as compared to 22.6% in 4Q '22. Gross margins of Distribution business, as mentioned earlier, have improved partly due to exit of 1 principal in Myanmar, which had a relatively low gross margin. SG&A expenses improved to 26.6% of operating revenue of 4Q '23, as against 30.7% in 4Q '22. The SG&A spending in 4Q '22 was relatively higher because the spending in quarter 1, '22 was relatively lower, and this was as per plan for the year '22. Adjusted net profit in 4Q '23 were about THB 622 million, which improved by 20.4% Y-o-Y, mainly as a result of growth in operating revenue, stable gross margins and reduction in SG&A expenses. Adjustments to net profits are made on the ground of ForEx gains and losses, primally on account of one-time Fx loss coming from Nigeria, expenses or taxes and losses from newly started business. Reported net profits in 4Q '23, were about THB 473 million, up by 18.4% Y-o-Y, mainly due to the reasons as explained earlier. May I now request our CEO, Mr. Vivek Dhawan, to share his remarks on the financial performance for FY '23 and also the outlook for the year to be.

Thank you, Francis. [Foreign Language] Vivek Dhawan. So I think Francis has given you, I think most of the facts about performance in the quarter. All I'm going to say is that I think we are very pleased with the performance, I think it's a good result. Looking at '21, '22, where we actually saw 60% growth in our profits over 2 years. Even on a normal period, this would have not happened; an exceptional growth in profit. There are COVID range of products that probably make up some 24% of our business and in most business and if you look around anybody, 30%, 35%, 40% reduction has happened in that part, I mean. But despite of that happening, our turnover had not come down. If you look at our sales, in spite of distribution, we having some things regarding principal changes and all that, we have still been able to maintain overall revenue. That's the #1 factor, which is very, very good to happen because of the other categories that we are in. So we are not only COVID related products, imagine we are only doing on the COVID products and just launched some of them. So these are long-term products and a new base. And with that, we also had very many new pharmaceutical drugs, which are launched -- are being launched. So I think nothing has changed phenomenally in our business plans. We have got a great pipeline in every country, where we are. We are launching new ones, we're competing in the old ones and also the OTC side, our brands are growing. Not related to COVID also, brands are growing. If you look at the growth of the remaining 70%, we probably also shown to cover all these, they must have grown 8% to 10%, otherwise, this will not happen. So that means, there's a healthy growth on what we are and what we have in there. And there are very good possibility that '24, there was overstocking as stocks, people are clearing on the stock; everybody in this town, people are getting rid of all the vitamin C they bought, '24 should see some clearing up and things happen on the brands like ours, which are well respected for products that we sell, we should start seeing an upside in that category also. So we are confident. And I think that's the guidance we have given, single digit growth in Branded revenue, distribution remaining nearly flat and also profits also growing in single digit. So that's still expected, and we have not changed our guidance now, as we go along and now take a look, I mean we'll come back to you in more honest and more clear to begin. We have always done that. But then we'll talk to you [Technical Difficulty] As far as it looks now, we are on the same track, right track moving towards '24. We have declared a dividend of THB 0.8, got the Board approval. This will be ratified at AGM, and similar to what we did last year, THB 1.6, so we are also protecting the same, THB 0.8 in the first half, we shall move on with the split up. Our Board has approved it, but it has to go through the AGM. And on the other side, I think -- we had some 42 products in our launch plans in '24; 13 of them are consumer health around Neutra supplements, included 29 are prescription. So they are in process. There are some 57 products that we have -- being launched or launch between '23 and '24. And the 50 new products are registered under application in many other markets we are in. Indonesia is seeing -- at least the manufacturing site, we are seeing an uptick. We are nearly double, or triple what we are doing in terms of production over the last 2 years. And we are ramping up capacity as agreed. We informed you we will be able to expand the plant. So we are also putting in a budget of some THB 274 million altogether as our CapEx for '24, out of which THB 250 million goes towards Indonesia, THB 24 million is towards ESG in Thailand, having did as the budget planned. Other than that, we have our normal THB 24 million that we say incurred in its improvement, redundancies, obsolete equipment being replaced. There's normal upkeep of GMP, other things that we have. So that's the only CapEx that we are actually planning. Other than that, most of our business is in line, if we don't see -- I don't see that Nigeria will have another big hit. Because now starting recently, other than what we look like in the first quarter because of the numbers, but over the next 9 months, we should probably sort that out. But now we have one rate, the CBN government rate and the exchange in one rate. There are no 2 different rates in the market. And as you know, we sell at market rates. With that happening, there should not be a very big gap in their exchange and should not have a big impact this year. Looking at all these things, pipeline, not big gaps, and another problem that we have the market, we should be able to deliver. And I'm sure all of you will have a lot of questions on Myanmar. So before answering each individual questions, you are as well aware, in the news you are reading what's happening in Myanmar, and it's tougher and tougher in many many ways. But having said that, the Pharma business still continues to perform, we shall not see major growth. That's why we say that there is not going to be a phenomenal distribution growth, it's going to be pharma and pharma still continues to import, sell stock and deliver and collect money. Because Myanmar did not have a major exchange issue, we sell in dollars, [indiscernible] dollar rates and try and get that money out quickly. Hopefully that should not be impacted. But again, this is our assumption, and we do that based on what we have seen; but if things get tougher, it could have impact. But at the moment, we believe things will continue as it is, but we will not see an upside in [indiscernible] till there is some stability in the political front. But at the same time, other market, we have had Indonesia, where we are actually growing all the markets we are going to see some growth. So we will accelerate some growth in other areas. So some of it will be compensated by the little or no growth impact. So that's the general direction. I mean I cannot give you a lot more information on the Myanmar, but there's nothing much I can predict, and I cannot be talking anything about the political environment in Myanmar. We're still working in the country. We still have a large team in the country. Though we have sized it correctly, but I'm sorry, I can't give you a lot more correct information on Myanmar. But we are on the ground and we still have a big reputation that we sustain there. And we work there and continue to do business there, because we are not doing anything but supplying medicines of the right quality to the people who still need it. So it's a necessary and if our job is impaired, we will be there for a long time. So that's the only other thing that I wanted to comment on. Beyond that, I think we can start taking questions. And I think that's probably more than enough for the moment than any other topic, which are more general, you wanted to discuss anything, which is very common too, I think it was only Myanmar [indiscernible] exchange. So these are common things which probably everybody will have on their mind, other than that[indiscernible]. So over to all of you as I think Mr. Francis said, we said tell us who you are and from what organization and then ask the questions, so we can answer it. And what we cannot do today, you're always welcome to call us, talk to us and we are at your service. Thank you. [Foreign Language]

Open to you.

This is Thanapol from CGSI. Maybe just a few questions. So when you guided earlier on your Branded business growth of about single digit, how much of it will be driven by Pharma and Nutraceutical? So are the growth rate same for the 2 segments? Or are you expecting one segment to grow faster than another, maybe some color on that?

I think Pharma is definitely becoming a bigger part of our business. We've told you this before also. I think you said by 30%, maybe you'll see 50-50 here. Today, we say 30%, 10%, 60%, but I think the ratio will change and is changing. The sheer size of Pharma, I don't -- look at the market. If the Supplement market is THB 10 million, the Pharma market is THB 500 million. So it is 50 to 100 times bigger than the Supplement market, in some way, THB 50 million to THB 500 million, THB 50 million to THB 1 billion. So I think the pipeline being rawer, the market size being bigger and the countries that we are entering with all these areas, Urology, Oncology, some Ophthalmic area. So we have a lot of pipeline in different areas. Definitely, the Pharma side will become bigger, 100%. But that doesn't mean that consumer side is not growing. So I think our growth in consumer side is the overcounter, also we have growth, and we have range of product there also. We have pain management, we are launching herbal pain management, cold and cough we are taking it to every country. So I think that each area has its own growth potential, but by the sheer size and the number of product categories we are in, the pharma will become bigger.

Okay. And what's the split between Pharma and Nutraceutical right now?

It will change. Because today, the split we said is 30%, 10% and 60%, right, but it'll probably become higher. The Pharma will become 30%, it will become 40% slowly over time. We don't have an exact number, but if you say 30%, by 2030 maybe Pharma will become anywhere to 50%.

[indiscernible]

Already 35%. Already catching towards 35%. So in the 3, 4 years, as we said anywhere between 28% and 30% maybe a 50% growth -- it could be higher, but 50-50. Consumer has 50%, Pharma 50%.

Okay. And then my second question is on Indonesia. Maybe just can you elaborate on how does the development has been coming along in the country?

We had mentioned, we had 2 parts. One is imported products. So we have got a lot of imported products registered, and we have launched them. I have some -- I don't have the exact number, but there has been a lot of product that we have got registration in Indonesia; 8 to 10 products have been registered and others are in pipeline. I see that here and have been launched already. So up to $1 million over is coming out of new product launch and register. And then the existing products in our portfolio in Indonesia. There also we are starting to ramp some of them going into the generic or the government tender business, and the capacities are being ramped up over time. So we are hoping by slowly in 2 years' time, which is probably [indiscernible] to get back. So both side, local production, local tech transfer, the current products and current tech transfer, all these things are ongoing, they take time but the fact is that imported products have been launched, are growing and new ones are under registration. Existing products in the factory, we are ramping up production and now we are competing in the local market. And new tech transfer also started. We have some tech transfer plan. We have also started doing local production. But in the new transfers, get the product, and register them. There are 2 parts, import and sell, grow what you had already and grow them; and 3, register or do transfer in the local. All 3 areas we are working on, plus the over-the-counter as well, we have just got our first approval. I don't want to announce it in a big way but we had launched it, but we've got our first over-the-counter drug approval as well, which is probably in the next month or so will double the margin. So I think a lot of interesting things happening. We have to see how we do well and how well we get out with what we have told you. So we are working on it with our best efforts, and we hope this will show results in the next 2-3 years. We are saying by '25, we should get to a breakeven point, right somewhere -- that will be a challenge at the moment.

Sorry, can you repeat that again? So breakeven in 2025 or by 20...

'25 is our plan. Internal plan is to get there by '25. That's what we are internally looking at. We had a longer plan, but we have now brought it quicker, and we're also trying to grow our business in other areas as well. All these streams are in -- most are already there, they are in progress.

Okay. And maybe my last question is on Maxxcare. If you look at the gross margin for Maxxcare, it's been growing every quarter, even on an adjusted basis. Though I understand that is because of the set of the [ principle ], but is there any other driver that's been pushing up the gross margin for the segment?

I will ask Manoj or Francis to answer this question. Are there any reason?

See, I think the overall gross margins will remain in the 20% to 22% range. Now what we saw in the last quarter was, again, a mix of products or [ principles ]. So I think our long-term guidance is -- I mean, for the next year is still that 20% to 22% range. Very difficult to predict it, depends on which [ principle ] slowed which product volume. That's a range, we still seek that.

It's a mixture of agency, [indiscernible]. And now more and more a lot of our [ principles ] in Vietnam, we also do complete services. The models have also changed. And probably in Myanmar also the models have gone through little bit. A lot of them have feet on the ground. Pharma companies have feet on the ground. But [ fewer ] companies are not getting less feet on the ground. So the models are also changing the margins there, and that gives you another look at the -- changes the look... [Technical Difficulty]

Maybe there was a disturbance.

From Yuwanee, you had a question, right?

For Indonesia, what is your revenue guideline in the next few years? I remember you used to give some guideline, please?

I think for '30...

No. I think see, by 2030, we project $70 million -- $50 million to $70 million by '30.

'30 was our guidance to get to about $50 million by '30. I think by now, we are already probably moving at $12 million or $10 million plus...

This will be what. Indonesia or...

We don't break it down. But yes, we're over $10 million plus now. So we have by '30, to get to $50 million. That's our plan.

I didn't understand.

$50 million, $50 million by 2030 is our plan.

So USD 50 million by 2030? Yes. And now we have about USD 10-plus million in revenue? Okay. My second question is, we saw what has happened in Indonesia with -- sorry, in Nigeria with the Naira depreciated by more than 50% in the last months. What is your take with this? How is it affecting your business?

I think the business in -- in Pharma is there are 2 things that happened. Can be converted to pricing within the market? In Myanmar and most countries, everything is dollarized. So whatever happens, everybody [ price ] is dollar. The only challenge is in country where the receivables are long. In Myanmar, the receivables were never long, you collect money, so you don't lose any money. There's a model. Where you buy [indiscernible] stay ahead of the dollar to the local rate. But if you have a sudden hit one night, tomorrow money you wake up, it goes up 100%. There you can't do very much, you want money or cash you're holding, it's a general problem. So Nigeria has this problem, that happened was overnight, they corrected the rate, government just corrected the rate overnight. Those were suddenly whatever line got corrected. But now I think with this correction was happening, the market and the government rates are becoming so close. And recently, I think last month, I think they remained one, the market rate and the open market rate is the same. And the [indiscernible]window is one window now. You don't have 2 windows now. So -- we are hoping that you will not have 2 different rates, two different Baht. Government rate and black market rates. This -- that's not the -- and then we are the pricing. So we correct our prices already to the new rate or higher than the new rate. So hopefully, this should not have an impact going forward if unless, again, 1,500 now that become 3,000 overnight. I'm sorry, I don't -- I can't predict that. But looking at what the government has been trying to do, it should not happen that way again. Other markets grow steadily, but if we know this is the amount of exposure, 5% is becoming 5.5%, 5.6%. So we are correcting our prices to stay ahead in most cases, wherever we can. And some maybe strategically, we don't do it also. Because we -- lot of our costs are in local currency. So in order to protect the costs, so there are modules we are using for a long time and managing. But this was a very sudden [indiscernible] which we -- I don't think anyone else would have predicted. [indiscernible] borrow locally, we cover our local risk to local currency and [indiscernible]. So we have a lot of ways to -- over the last 30 years, we have insured currency. If you look at over the 30 years, its been 1 year minus, 1 year plus, we should have [indiscernible]. But this year, probably has been an extreme -- extreme -- I would say extreme point. That's what I think, I mean, Mr. Thomas and the team here can also confirm this. In your history, there's not an extreme point.

It is probably the AR -- because at some places, we manage it more proactively here. There was a problem in getting currency. So there was a relation of cash that is what happened. That position has improved, that was [indiscernible], so we don't see that happening soon. But at the same time, what we do is that we price our products in the market at a higher rate than the current exchange rates. Even there is a depreciation, they don't have discover -- these strategies we have changed. Pricing in the market is more than actual what we've done [indiscernible] what is the actual exchange rate. So these are mechanisms we are trying. I hope that answers your question.

Thank you. Two more questions, please. One is that we saw the SG&A to total revenues down in the fourth quarter. Can you please give us some color on that? And the second one is, please give us the outlook or update for the first quarter '24, please?

I think on that SG&A, it's purely -- last year, our SG&A in the last quarter was very high because after COVID, people wanted to spend. So it went up unusually high to 30%. So that is never our average -- so now it has come down to average basis, annualize it, you will see that our SG&A [indiscernible] grew by 1% from last year. So the last quarter is not a good [indiscernible].

Yes, yes, yes. You're absolutely right. The averages are 27%. [indiscernible] today also [indiscernible].

1% difference.

We've always been in the -- historically in that range with turnover related to the more -- I think we have discussed this -- a lot of our spending is based on turnover. So a lot of our activities are -- one is fixed, of the fixed cost, fixed [indiscernible] payment, retail, the promotions are all related to sales also. So generally, sales [indiscernible] happen then you don't have this. So it doesn't vary that much and remainder is stable. Very very rare cases you will have an impact of a person because you will advertise -- last quarter, you had advertised in TV and [indiscernible] still is not an -- Above the line, a very small part of our business anyway. It's not a 10% of our budget, we look at advertising but is a very small part of our budget. So generally, I think, it remains within the plus/minus 1% rate. That's how it is there. That's how it works in that rate. It's kind of budget we have in every country. We [indiscernible] it down to every market [indiscernible] controlled through the sales versus spending budgets are controlled.

Yuwanee, just to the other part of your question, guidance for the first quarter. So normally, we try to avoid guiding quarter-to-quarter because -- for a reason that we have told even though there are [indiscernible] and it's given the COVID peak last year, these are not comparable quarters as well. Also, we have some 40, 43 products getting launched this year. An impact of all this, we only see -- you see it in the annual performance. That's why we would like to stick to our annual guidance [indiscernible] that people, our banks should grow mid-single digits. Our distribution will be flat, and now profitability we're looking at, I mean, little growth. I think quarter-to-quarter is going to be very intricate to guide, perhaps not even the right thing to do.

Narumon, maybe requested to ask a question?

I have a couple of simple questions on 4Q. Could you please break down the FX losses for 4Q '23? I understand that it came from like Nigerian and Myanmar. So it would be great if you break down which one is much more loss contribution for FX. Do you have any number of breakdowns?

Yes, 70% to 80% of it comes out of Nigeria. So, in Myanmar we don't have huge products [indiscernible] and the impact is very little.

Yes. And one more thing. What is the contribution of Nigerian sales in 2023?

Very little.

I understand it.

We don't break it down, but it's very insignificant.

Is it fair to say there's low single-digit contributions of revenue from Nigeria?

Sorry, can you ask again, can you come again?

Is it fair to say that the revenue from Nigerian is like low single-digit contribution?

You're absolutely right. Low single-digit contribution, but the impact on the ForEx loss, they have contributed to 70%, 80%, -- you're correct. Absolutely right.

Yes. And one more question on the balance sheet on account receivable, we saw that account receivable overdue over 3 to 6 months has been jumped at year-end last year. So could you please elaborate more on that item? And probably it would be great if you tell us about our look for a overdue [indiscernible].

You should look at Mega's working capital overall, and I'm focusing only on the AR. If you look at our cash cycle, our cash cycle has gone up from 128 days to 132 days. And this is in the range. Now the way our business is structured, we have government tenders, we will supply the government, sometimes governments take a long time to pay back. So it does -- quarter to quarter, these changes will happen. Our overall cash flow is within -- the cash cycle is within the range. Now again, if you look at places like Myanmar sometimes there are cash hold ups. Sometimes it takes time, but this has been corrected. So you will see a correction of this happening this year. I mean I think the most critical aspect that we should focus on is the cash cycle, which is still within the range. Also, if you look at our operating cash flows, 97% of the profit we have as operating cash flow, also shows that the cash flow is very strong. So these are temporary things that we people get [indiscernible] cash cycle is [indiscernible].

Sometimes we have tender will stop 9 month stock. And sometimes Visa expires. We cannot give you every small detail. If [indiscernible] expiring that we import 1 year stock. So these are also, again, things of payable and receivable, can change because of certain extreme conditions.

Operating cash flow is very strong so it will also go back.

Even as compared to 30th September, our ODS position is much better than [indiscernible] December.

Yes. Yes. I didn't doubt about your cash flow. It's actually strong. I agree. But I just want to know in the details why the details of the account receivable is quite changed following the probably found the business change.

Any more questions from our investors? Followers? Shareholders? One more from Harry, Please go ahead.

And congratulations on the strong numbers given the circumstances. Just -- sorry, a question on the ForEx. And apologies if you've already mentioned this, but how come -- so I saw the $300 million, when you're calculating adjusted net profit, the $300 million is added back, but there was a loss of $700 million. So does that imply that $300 million was related to the Nigerian mismatch in the currency rates?

I think if you look at our MD&A, we have been guiding this from last year or a year before. [indiscernible], we have a dual currency situation where in the actual currency, the government approved is 2,100 or something, but actually, the actual transacted rate is over 3,000. So when we report and when we actually account for the payment and the gap because we booked our [indiscernible]. So it's a dual currency situation, which we actually remove to normalize it. So it's not a Forex [indiscernible] because of this accounting glitch of the dual currency rates. And we have been guiding this and expecting this for the last 2 years, if we go back and see [indiscernible] so the real Forex [indiscernible] is only $300 million out of which 50% is [indiscernible].

Nigeria, yes, yes. And so that's the reason why you -- for the adjusted net profit, you add that back. Okay. And you just mentioned that there's some of the business, which is for government tenders. How much would that be as a percentage of total?

It's very difficult to put a number on it. I think it is...

In Vietnam, in Thailand and in Indonesia, given Pharma business, Myanmar did damage now. I have a universal health care scheme and they [indiscernible] It's not something that -- it's not -- we are not going to HIV or we are not into TB or COVID. These are normal products that are hypertension or diabetes and we are bidding in -- we are listed in the exchange and based on some [indiscernible] price basis, some is based on your criteria, and we are saying that [indiscernible]. And then we have to -- we win them on price and we supply over a year -- over whatever the period the tender is. And in some time, the tender depends on hospitals also. There is an amount, but actual purchase happens in hospital quota where they have demand. So there are different models. These are not exactly that you have a winner tender and they buy everything up there. So everywhere we are -- different countries have different models. Malaysia government buys something, but you only participate in some which are -- some part of that. So there is -- our 60% business is retail, 40% is [indiscernible]. There is some portion of that [indiscernible] this is normal business. These are called tenders, but they [indiscernible] we supply them to hospital, individual hospital. And as I said, these are not big, single big one, I won the tender for COVID vaccine [indiscernible] one time [indiscernible] fair. It's a normal thing that happened.

Okay. And just with regards to Indonesia, you mentioned there was -- there's domestically produced products and then they're imported. And I understand that in Indonesia, you can get a better price when the product is manufactured domestically. Does that mean that you get a...

It's not -- let me clarify. There are a group of products that they allow you to import. They are not -- either they are on the back end or they are not enough producer in the country [indiscernible] till that you can get an import license. And when you get import, you give a commitment in 5 years, [indiscernible] manufacture locally because that's the regulation. In some cases, they may extend it. There are no other players or the complex [indiscernible], they may allow some extension. So that's the model. So most products are made locally. Now we get better pricing if you make locally. No, I don't think so. [indiscernible] tender and competition. Now it's very simple. If you win and you are approved, then you can supply. Government can choose to buy about 1, 2 or 3. So you are basically competing with other local players on a pricing like in the open market. But the buyer is -- the payment into the government -- reverse a health care scheme. So the hospital [indiscernible] buy, but it will be reimbursed with the government, that's all. So you have a competitive -- you are selected and then you are competing with the other 3, 4 people, who are also fighting in that category. That advantage of having higher prices in all that Indonesia has is now very competitive in the [indiscernible]. It's a company that markets, unless we are playing very unique product that every people don't have. So all of us are trying to have newer products that we are bringing into the market that we can bring in. So we have a strategy we are bringing in new products to the import group and then over time, transporting them to local monetizing. That's why we have a plan there and whatever we can make locally as what we're already making locally, we are ramping on certain areas where we can complete our volume. So some of volume drivers, some of new [indiscernible] coming out of imports over the next 5 years, we bring up the local manufacturing. While we keep adding new products to import. And at the same time, we are doing OTC products as well, right, to build an OTC platform for our products.

[indiscernible] go ahead with the question.

So I've just a couple of questions. Just one, you mentioned on distribution that your Vietnamese business, the principals, they are doing a more full-service operation. Can you just sort of comment how big is the Vietnamese business for distribution today? And what sort of growth rates you're seeing?

Our distribution business, we have got a very large distributor, as we mentioned in the past. We are only doing Pharma in Vietnam. A large part of that business in Mega's own brands, I would say 70%, probably 65%, 70% is our own; 35%, we have partners who have left. Some of them do complete service with us being import stock, sell, deliver so our margins are maybe not as big as our branding business, but a little bit better because we also do complete marketing sales and services for them thereby we also select which products to play in, the best line that a larger part. There's only a very small part of the business, I would say, 10% to 15% of the overall distribution where we work with partners who have their own teams of background. And we are only importers and service providers. Our model has largely shifted to full agency branded business and a small part of our legacy partners remained with us who have their own team on the ground. And as the model we follow, we believe that we are building on more branded and with that kind of size and that we grow $100 million, $200 million of our own business, I think our distribution also strengthens our ability to reach outlets. We cover like in Vietnam today for some of our EUGICA, where I heard, if I'm not wrong, about 30,000 outlets for us. Smallest product and [indiscernible] 18,000 outlets. So, I think this is where our strength comes in that we can do work and active in the retail as well. It's a combination of both. We still have partners and we work with them. So I think that's the model in Vietnam, but Cambodia and Myanmar are more distribution companies in Real Max Care Division business where we actually handle [indiscernible] and Pharma companies and provide them services of pure distribution. In some cases, we also house their principle to sit with us and they have their independent teams as well. Vietnam is a little bit more moving towards more agency [indiscernible] agency and our own brands and some promotions with 15%, 20%, I would say. This is my estimate but I could be a little bit [indiscernible] the market and the exact percentages, but not very [indiscernible] in that range, if you look at the total [indiscernible]. We have to look at it -- to look at the numbers exactly is not [indiscernible] I'm just giving on top of my head, so I'm very sorry [indiscernible] That's the model -- model A, model B. We have 2 models, right? There are 2 types of distribution models.

Okay. And just on the other one, you talked about launching 42 products this year. Does that mean there'll be, I suppose, an increase in the A&P side of things as you launch those products?

Generally, as we mentioned, we don't -- we are not a company that goes on TV the day we launch Indian product. We are added to our existing line, they get into selected retail outlets and also the majority orders, out of 42, 29 are Pharma. There is some cost. I don't say there's 0 cost, [indiscernible] we do launch it. So it's not 0, but it's not huge as well. So it's not going to have a major difference that our [indiscernible] shoots up by 50% [indiscernible] that when we saw increase, but the sales also happens, right? [indiscernible] We have to spent 3 years, launch it, and get in the market before we go above the line that [indiscernible] line is a later activity.

Okay. And so how quick do these things ramp up to sort of maturity where...

We give it 3 years. In 3 years, we can see them becoming at least a significant $0.5 million, $1 million brand between anywhere there...

See, again, one thing if you look at us our new products. During COVID, we hardly had any loans. In the last 2 years only 4 loans. In last year, I mean, this year -- I mean, '23, we launched some 14 products. This year, we are launching 43 products, which is also [indiscernible] kind of all the products coming [indiscernible] proactively. So this ideally is probably a big base [indiscernible] look at our current product -- I mean product base, we have some 50 products [indiscernible] 70%, 80% [indiscernible]. So, this is already the largest launch that we have and [indiscernible] this should have the next 3, 4 years [indiscernible].

Sorry, did you say about 50 products account for 70%, 80% of your business?

Yes.

About 50 products contribute to 70% to 80%.

Any more questions, you can start. If you have a question, please. All right. I think if there are no more questions, and all of them seem to be answered. If not, we are available, as I said, any time to answer more. Thank you once again for your understanding, for your support and being there. We stand hopefully, we will get back to good old days. [indiscernible] should come back. Without COVID, we should be back on track and growing our business in the next few years. So once again, thank you so much. See you next quarter. Thank you.

Thank you.

Thank you.