Albert David - Potential Bagger?


(bbbhutra) #1

Albert David Ltd (ADL), a part of the well-known Kolkata based ‘House of Kotharis’ is distinguished in the field of manufacturing Pharmaceutical Formulations, Infusion Solutions, Herbal Dosage Forms, Bulk Drugs, Disposable Syringes & Needles.

It made a modest start in 1924 with a single manufacturing facility. Today, it has three manufacturing units located in Kolkata in West Bengal, Ghaziabad in U.P. and Mandideep in M.P. Its Kolkata plant is USFDA approved whereas the other two plants are WHO CMP & ISO 9002 certified. Some of its bulk drugs are also certified by the UK and the European Council.

ADL has a strong presence in various drug therapeutic classes like Immunomodulators, Vitamins & Nutritional Supplements, NSAIDs, Apetite Stimulants, Liver Protective, Anti-Ulcerants, Laxatives, Anti-Arthiritic Preparations, Muscle Relaxants and Adaptogenics among others. In the current year, it introduced new formulations in segments like anti-asthmatics, anti-ulcerants, another proton pump inhibitor and nutritional supplements. It also plans to venture into the pre-probiotic, infertility and nutraceuticals market.

With an extensive network of 1600+ stockists, ADL’s products are available all across India. It also has a presence in South East Asia, Africa, Middle East, Europe, USA and Latin America, covering approximately 35 countries.

The Company expects to achieve a turnover of Rs.400 crore in FY17. Its market cap is closer to Rs.200 crore, which is cheap when compared to other small-cap and mid-cap pharma companies which trade at a market cap:sales ratio of between 2x to 3x as against ADL’s 0.5x. It reported an EPS of Rs.15 in H1 FY16 and is trading at a P/E of 11x if we annualized the performance.

ADL has a small equity capital of Rs.5.71 crore supported by reserves of Rs.130 crore. The promoters hold 60.9% of the equity capital and the balance is held by the investing public.

Recently, the Company sold one of its brands ‘Actibile’ to Zydus Healthcare for Rs.55 crore. With a market cap of just Rs.177.7 crore and one of its brands reaping Rs.55 crore, the Company has made me take a tracking position in the stock.


(shunz) #2

this is an exceptional item. yet company has added this to its CFO. is this ok or an instance of aggressive accounting?


(Hardik) #3

That’s an interesting find.

Few Points:

  1. Sales for FY17 will be muted. The company in its FY16 AR has mentioned: “The Year of 2016-2017 will be very challenging as the competition will grow more fierce in this highly regulated market.” Selling of Actibile will contribute to this as it constituted around 5% of total sales.

  2. The operating margin seems to be sustainable at around 9-10%. Net profit margin (excl. exceptional item) for FY16 has reduced significantly to around 2.25% from an average of 4.30% in previous 4 years.

  3. The company has been consistently generating FCF and has shared them with shareholders as dividends.

  4. The company has not diluted equity in past 10 years which is a good sign. They have been able to fund capex through internal accruals and debt, which also they have significantly reduced from 42 Cr in 2014 to 20 Cr. in 2016. This has improved their short-term credit rating by CRISIL from A2+ to A1 and reaffirmed long-term credit rating of A-/positive.

  5. No succession plan in place. Age of all KMP’s is above 63. Could this be the reason for selling "Actibile’?

Can someone who understand pharma throw some light on the prospects of the company and industry considering Albert David’s products? Also, I could not find capacity utilisation for their 3 plants in AR. Need to dig deeper but if someone has this information then please share.

Discl.: Not invested.
P.S.: INDIANIVESH CAPITALS LTD. (Daljeet Kohli) has bought 19866 shares on 31/03/2016.


#4

No growth here. It is pretty old company. If company is forced to sell pieces of operating biz it is not something great unless they have a game plan to invest in high growth areas.


#5

i have been on their Mandideep factory twice. The unit has huge scalability as well as land area but the management seems to have completely forgotten about this unit. Once a best factory in that region, it is currently running under capacity and barely breaking even. I do not follow this company but i think it has huge potential provided the mngt takes on a more agressive outlook. Else the company could stagnate hereforth.
Disclosure: My answer is based on only one of their three units.
I do have capacity utilisation and financials but not authorised to disclose.
Nor invested nor tracking.


(khs) #6

FYQ1 Results: http://www.bseindia.com/xml-data/corpfiling/AttachLive/4de8cf3b-feac-4c2f-a331-ee9e41ae9e4b.pdf

Not a good set of numbers. Sales down due to de-stocking


(sambandham82) #7

If sales is down only due to destocking, it should not be an issue as it is one-time event.

Can anyone clarify on destocking. Does it mean distributors and retailers dont buy from company but company still manufactures and keep it as finished goods (or) company itself dont manufacture in order to reduce current inventory to negligible amount ?