Hi Mahesh,
Thanks for your wonderful effort in putting up this report.
I had also looked at jenburkt earlier but gave it a miss and latched on to Ajanta Pharma instead. Jenburkt after going through your report looks interesting.
Few minor concerns:
1). Most of the products listed are products which have tremendous competition from other players as can be seen from the number of players manufacturing the products and there also cost competitiveness of Jenburkt does not stand out too much. So the company will always be involved in a dogfight to gain market share.
2). Dividend yield of 6% we are expecting. Now it needs to be seen what kind of dividend payout is maintained with increasing profits. If it yields 6% dividend for FY 11, it offers immense safety with good upside potential. But if div yield remains at 3.5-4% then attraction lessens somewhat.
3). The company does not have any blockbuster drug brand among all its brands which maybe in the top 5 prescribed brands in its class.(If it is there, then I dont know about it)
4). Most of the products listed are not very new products-- most of them have been in the markets since a long time. (Ajanta Pharma has this advantage of launching first time in India kind of products-- hence better growth prospects-- just to give an example, it was the first company in India to launch a drug for atopic dermatitis namely Pacroma (pimecrolimus oint) since almost 6-7 months and the next company to launch it is Biocon which has yet to get its strategy in place for the launch of the drug-- I am referring to this bcos I have a firsthand experience in this branch being a dermatologist)
In fact the above fact is what tilted the scales in favor of Ajanta (their sheer aggressiveness in launching products totally new for the markets and making a success out of it --e.g carofit an anti oxidant, its brand extension carofit ultra cream is another example)for me besides its outstanding record for past few years in terms of sales and profits
5). Coming to valuations front, at a PE of around 7 plus, although the valuations are not very demanding, still I think there are a few bigger companies again like Ajanta with similar or better valuations-- Ajanta at cmp of around 215 with expected consolidated EPS of around 38 for FY 11 is available at less than 6 PE and it is a much bigger company compared to Jenburkt. (although it doesnt have the attraction of Jenburkt like higher div yield, higher roe and lower debt)
6). Coming to a scrip catching market fancy,the relatively bigger companies like Ajanta are likely to catch market fancy earlier as compared to Jenburkt.
Having said all this I still am tempted to buy Jenburkt after going through your detailed analysis because the safety margin is good in Jenburkt and if as you say growth materialises, it makes for a wonderful combination. Thanks again for the detailed report.
PS-- Again let me stress that my points raised above are just to list the possible negatives and not to stop anyone from buying into Jenburkt. In fact I myself am quite tempted to buy Jenburkt.
Just for comparision sake I am giving last five years figures for Ajanta along with first half results.
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LAST FIVE YEARS SALES, int paid, NPM AND NP
**YEAR MAR05 MAR06 MAR07 MAR08 MAR09 MAR10 HY FY 11 ****
** sales 179 212 241 291 322 385 21 **
** int 9 11 12 15 22 19 **
**
** NP 7 10.3 13.7 17.8 21.4 28.6 17**
Npm 4.13 4.85 5.68 6.11 6.64 7.42 8.09
What I am impressed here is the consistency in both sales and NP growth along with improvement in NPMs.
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