Thanks Mukesh, the information is more or less the same as in press release and annual report.
20th Oct Record Date for Stock Split…
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Any information on FDA inspection for Caplin point?
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No Atul., not yet.
I will try to get the information from the management.
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Stock is up 18% today…any news ?
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Must have got it by now… Stock split announced
USFDA inspection was scheduled for 3rd week of October. There is no official news about that but presumably it went well given the stock reaction. Company can only make an official announcement once they get a formal report from USFDA. Until then this stock will trade on technicals. Long term investors should just ride out the volatility.
Disc. Invested.
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Another set of great numbers. Consolidated PAT growth by ~ 40% QoQ and ~60% YoY
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=385ef9ec-365a-4666-ae77-1cdeacb3b493
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The company market cap is almost 3000 crore. Yet no mutual fund holds it. I wonder why. because their number has always been consistent.
Gautham.,
I think it is because there is less visibility in products & sales., unlike in case of other pharma players like Ajanta, Natco, Shilpa, etc.
Once, things start becoming more concrete, for eg. USFDA approval for specific products & subsequent sale of the same in developed markets., then the mutual fund bandwagon may join in.
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Hi,
Do you know any further update on US FDA approval status? Last update was provided by company on 29th Oct 2016 stating assessment completed and they are working on 2 minor observations. Do you have any view or how long it will take to get US FDA approval?
Regards,
Vinoth
Upcoming events for the company:
- Information on FDA filling and approval status.
- Information on formulation filling in Brazil and their approval status.
- Partnership for the new section of the plant with completed civil work ( I think this will come along with approval for US FDA)
- Q3 results
- Interim dividend, if any, like last year.
Digging up this beautiful thread after a few months. I started investing 2 months back , Well this was the first stock which I analysed . Well what i dug up mighr be already there in the threads.
Firstly they have handsome profits . Better than what is reported for sure. Well wheres the profits then if not in the P&L.Look into the Obviously the books are fudged . The advance from customer thing is a crap which they want to sell . Who pays advance for a dosage of paracetamol or painkiller like ibuprofen even though it a country like Guatemala . What special characteristics does it have that its customers can pay advance to get the product. The AR being so low is again something which is practically impossible . I being a CA i can surely say that the auditors are being paid well enough to continue these malpractices or they are maniputed in such a way that they are convinced by the reasoning given by the management. The management does play a pivotal role as practicing CA’s give away to company demands to keep their revenues . Here it seems one of the cases .
To highlight lets take up how things work . I might be wrong in my theory but well I can just estimate until the company proves us wrong .
1 ) The company could never get into the Guatemala on its own due to the Govt. Anyways small underdeveloped countries generally are not to be expected to be greeting Indians with arms wide open . So to crack the deal they most probably hooked a local importer who provided his license . Well in the case of Guatemala (their biggest market ) and its importer is Neoethicals ( http://www.neoethicals.com/ ) . Now they show sales to Neoethicals well you will be surprised what the average sales price shown as export and what the final MRP of the product being sold is . From what i could gather from public data available on Zauba till i guess Oct and this online pharmacy store which has many Caplin Point Products a few of the list with search term Caplin http://carolinayh.com/index.php?route=product/search&filter_name=caplin . The retail price is atleast 2x in some cases even more than the export price of the medicine as declared to customs and info available with Zauba, While technically the goods are sold by Caplin to Neoethicals and the profit Caplin books is only amounting to its cost of manufacture/trading and the export price as shown in Zauba . Neoethicals is the owner of the goods and has every right over the goods speaking from a book point . However from what things stands hes just a small fish with only his import license and no might. He takes his cut maybe in terms of some import license fees and then Caplins distribution team in Guatemala take care of the distribution to retailers and pharmacy chains . So for example a medicine costing 100 is sold to Neoethicals Guatemela for 200 . Caplin booked profits worth 100 . Now these goods are retailed for 400 . Reduce the distributor profits ,expenses of importer Neoethical taxes and stuff lets take it at Rs.150 . Still it earns Rs. 50 extra ( (400-150)-200) = Rs. 50 which it cannot show as sales in its books cause sales recorded at Rs.200 . They want to bring this Rs.50 earned in Guatemela back into its books . The easiest way show Advance received from Customer . This way year on year this figure will only go on increasing . So the Advance from Customers increase can mostly be Profits which are never shown to P&L . Now this is how their magical AR days of less than 30 is acheived in my opinion .
What should have been the accounting
Sales should have been booked at 400 . Expenses should have been accounted for. Remuneration provided to importer for grant of license should have been accounted for similarly.
How do I view the company
Well inspite of being a wealth creator . The company actually doesnt seem to increase it Shareholders wealth .What prevents it from doing this maybe they dont want to attract attention of bigger players into the region or maybe their philosophy is to not let its stakeholders grow but this kind of thing doesnt instill confidence on the management
The company can surely grow its profit by 2 ways inspite of decreasing sales . Either reducing the percentage it shows as advances and the second will be writing of the Advances from Customers to P&L . Will it do so ? I cant pin point but mostly it wouldnt .
Also the USFDA approval is pending from December and the management is tight lipped about it is something i wouldnt expect.
Frankly gave a skip at 340 levels only due to the management not being transparent enough. I feel till their unregulated markets sales grow their profits can grow exponentially due to their unique geographical advantage but the management policies dont instill faith on a common investor .
Edit : I must admit awesome research has been done by boarders on this thread . I feel the company is a trading company much more than a pharmacuetical one as much of their imports to unregulated market are normal medicines and well they do a lot of export from China to these unregulated markets .
Another thing to ponder upon .Should such high valuations be provided to the company if we view it from an angle of a trading company .
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Good research buddy, thanks for sharing the wisdom 
I am sure you would have read that the promoters have 2 sons. One is married in Guatemala to a local. Another one is taking care of supplies along with the chairman.
They have approvals from Europe and Brazil which are yet to start reflecting in topline and bottomline, again information here is missing from the company.
Yes, corporate governance is an issue wrt transparency but which Indian company is transparent wrt its accounts and dealings?
Having said this, this stock is 100x for me and i continue to hold. New investment depends upon one’s risk taking ability. This stock will be 4-5x in 4-5 years given the growth prospects.
Edit:
First one is taking care of sales, second one of supplies.
What I do agree that it’s increased 100x and well yes opportunities still exist but their profits won’t be as much as what they have in unregulated markets .What was caplins USP was buying cheap from China and selling to unregulated market at premium rates where there’s not much competition .How will they compete in regulated markets with advanced drugs is a thing to watch out for .While till the unregulated markets remain strong due to lack of competition it will be a cash cow for the other businesses but how will their us / Brazil and European endeavours proceed is something which only time can tell
Risk is a personal criteria for investing .
Caplin has (1) moat of pharmy network in the country where it operates. (2) Asset light model…outsourcing manufacturing (Buying from China)…so they can immediately switch to other drug if one has problems…not much capital investment!! (3) Excellent networking with local doctors and pharmacy in countries where it operates (4) it is small market for big companies but large market for Caplin is also one kind of moat.
I don’t count on their plant and USFDA approved branded products but my investment is based on above moat.
Risk is high, so is the opportunity.
Also, i am not expecting this to do another 100x from here. I have very reasonable expectation of 4-5x in 4-5 years time. Which given the small base of the company is not totally herculin task.
Further, if you look at the annual report the company plans to do 240cr of net profit by 2022 and it also reiterates to grow @25% per annum both topline and bottomline.
So, far company is on track to leave those numbers far behind. Also, the company is expecting margin expansion as they are planning to get in to premium products. Currently, they are selling generic drugs at throw away prices (compared to regulated market premium pricing).
Having said this and as written before. It’s always risky to invest in unknown companies.
PS: This is not a recommendation to buy/sell the discussed stock.
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Stock options of 288500 shares granted by the company to the employees :
http://www.equitybulls.com/admin/news2006/news_det.asp?id=205168
This takes Rs. 11.5 crore out of the company’s networth at current price.
My perception is that this is Not a good sign…
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Agree, Exercise price is Rs 2 i.e. face value of the shares. Stock options are given to employees so they work hard in order to increase profits which in turn should increase share price in the long run. Such incentive work only if the exercise price at or above current price. If the exercise price is very low (which is in this case) employees have no incentive to work hard as their options will always be in the money as and when they vest. This is more of a deferred compensation rather than incentives. This amount should be subtracted from profits to arrive at true profitability.
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