Mega Lifesciences PCL (BKK:MEGA) (Q2 2026) Earnings Call Highlights: Record Margins and Robust ...

Negative Points

• SG&A expenses increased by 15.6% YoY in 2Q '26, with SG&A as a percentage of revenue rising to 35% from 33.5% in 2Q '25.

• Operating cash flow conversion was lower at 76% of net profit in 1H '26 due to planned inventory buildup.

• New manufacturing facilities in Indonesia, Vietnam, and Myanmar will incur depreciation and pre-operative costs, potentially impacting margins in the near term.

• Cambodia market continues to face challenges, with decline stabilizing but not yet showing recovery.

• Southeast Asia growth was relatively slower at around 8% (excluding Cambodia), below the overall company growth rate.

• Myanmar's demand growth is constrained by stagnant GDP and income levels, limiting long-term growth potential.

Q & A Highlights

Q: What is the expected impact on gross margins in 2027 as the new Indonesian facility comes online and ramps up utilization? A: CEO Vivek Dhawan explained that while new facilities will incur depreciation and pre-operative costs during the underutilized period, the growth in the branded business should offset these additional expenses. Deputy CFO Manoj Gurbuxani added that the company maintains its gross margin guidance of 63% to 65%, even with the Indonesian facility becoming operational next year.

Q: Can you provide more detail on the drivers of the strong growth in Africa and Latin America, and is this growth sustainable? A: CEO Vivek Dhawan attributed the growth to a combination of pharmaceutical and consumer health products, noting the company has built a strong Mega We care brand in Africa. He highlighted expansion into new segments like clinics and doctor cabinets in Latin America, and noted that both regions are growing from a low base. He expressed confidence in the long-term potential, particularly in Africa with its large population.

Q: What is driving the improved performance and record-high margins in Myanmar, and is this sustainable? A: CEO Vivek Dhawan explained that the improvement is due to better product mix and improved availability of funds, which allows for more imports. He noted that while demand hasn't grown due to GDP stagnation, there is still significant demand for their established products. The growth is driven by the ability to supply products, and margins fluctuate based on whether products are imported or sourced locally.

Q: What is the expected growth rate for the Mega We care branded business in the second half of 2026? A: CEO Vivek Dhawan confirmed that the company expects to maintain low double-digit growth of 10% to 12% in the second half, consistent with the 11.9% growth seen in the first half. This growth is expected to come from all three major regions: Southeast Asia, Africa, and Latin America.

Q: What is the expected trend for SG&A expenses in the second half of the year? A: Deputy CFO Manoj Gurbuxani stated that on a full-year basis, SG&A expenses should be around 32% to 33% of operating revenue, with growth marginally lower than revenue growth. Regional Finance Head Francis Rego noted that quarterly fluctuations are normal due to the timing of spending, but the full-year trend should align with business growth.

Q: What is needed to re-accelerate growth in Southeast Asia to sustain double-digit growth for the Mega We care business? A: CEO Vivek Dhawan noted that excluding Cambodia, Southeast Asia is already growing at around 8%. He expects a slight improvement in the second half due to seasonal factors, as historically the second half accounts for 55% of annual business. Combined with continued strong growth in Africa and Latin America, the company is confident in delivering low double-digit growth.

Q: Can you provide an update on the progress of the new manufacturing plants in Indonesia, Vietnam, and Myanmar? A: CEO Vivek Dhawan provided updates: the Indonesian plant expansion is nearly complete, with the warehouse starting next month and the plant ready for the first quarter of next year. The Vietnam plant construction has begun, with a projected completion time of 15 months, followed by a three-year process for GMP approval and commercial production. In Myanmar, the land deal is signed, design is in progress, and construction is expected to begin within three months.

Q: What is the current business mix between consumer health and pharmaceutical products? A: CEO Vivek Dhawan stated that the consumer health, supplement, and nutraceutical business accounts for about 50% of the branded business. When adding over-the-counter self-medication products, this figure rises to approximately 65%, with the remaining 30% to 40% being pure prescription pharmaceutical products. He expects this ratio to remain stable going forward.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .