Shilpa Medicare -Racing away on the Oncology API highway!

Invested for long

Added More

Some factual data comes out of management meeting

Analysis — No Source particularly

No one mentioned today’s 10% upmove in Shilpa

ValuePickr members are very modest ))

I guess 10% up move here and there for valuepickr stock is no more a big deal and people in this community are very confident in the future prospects of all valuepickr portfolio stocks.

Given the quality of stocks in most member portfolio’s and the time they hold it for, I think people will feel bad if they get just a 2 bagger :wink:

I was contemplating on buying Shilpa for about a week now. Went through this thread along with the Pharma sector FAQ and developed some conviction to enter in it today. Made Shilpa as 10% of my portfolio this morning and the upmove is a pleasant surprise indeed. I understand the luck here and that this is minuscule in the grand scheme of things but I thank all the contributors to this thread and admin for the Pharma sector FAQ which helped me build the conviction :slight_smile:

So it was your buying which took the stock up 10% today ))

:))

I guess that would be possible if I had a capital of roughly 1000 times my portfolio :wink:

Govt to correct taxes on imported goods to boost manufacturing. News on financial express. posting one part of the news, you can read the full news from the below link:

“In the case of pharmaceuticals, imported active ingredients attract 12% customs duty, while finished products attract only 6%, leading to accumulation of tax credit,”

Govt is going to reverse it that means tax on finished drugs would be more and less on companies which procure raw material for making APIs. If this happens it is going to be a boost for API manufacturers.

http://www.financialexpress.com/news/govt-to-correct-taxes-on-imported-goods-to-boost-manufacturing/1266932/1

@Nitin

What i understand is exactly the opposite. Government wants to disincentivise export of raw materials and help those manufacturing intermediate and finished goods, progressively in that order.

I think this is positive for all finished goods exporters.

These changes pertain to importing APIs etc, not exporting them.

This step is intended to increase manufacturing of formulations or finished products using locally made APIs.

Hi,

Q1 results are expected on 14th, What are the estimates ?

My estimate says, PAT growth should be around 60 %, close to 25-26 Cr.

Is it is less than q4 pat, arounf 22 Cr. (40 %), it may also go ajanta way after q1 in the short term, as I think Mr. M is expecting a good qoq growth of say 10 %. In the long run the business continues to look v promising.

US FDAapproval is also taking longer time than expected.

Comments Pls !

Q1 results out(in RS Cr)

Standalone Consolidated

Q1 FY15 Q1 FY14 Inc/(Dec)% Q1 FY15 Q1 FY14 Inc/(Dec)%

Sales 127 103 23 139 114 22

PAT 19 17 12 17 17 0

EPS 5.05 6.87 (26) 4.53 6.91 (34)

  • Outstanding shares increased from 490 lakhs to 771 lakhs.

  • Promoter shareholding decresed from 55.88 to 53.32 of total shares.

Results are good in my view. Need to knowthe sharp rise in tax figure as compared to Q1 FY 14. Today’s sharp correction in price post results looks to be good oppurtunity to buy.

I think it missed the estimates, and as feared has gone the Ajanta way. The stock reaction seems overdone.

It wil be interesting to know @what level it will be a no brainer, as ajanta is v attractive below 1500.

The long term story is intact, the biggest trigger would be US FDA approval.

The results are decent.

Pros that are likely to be mis-understood as cons:

)- Other Income in June 2013 was abnormally high at 4.5 vs 1 in usual cases, including the latest quarter.

)- EPS notional fall is due to the stock split right after June 2013 quarter. The real dilution from Tano Capital was < 5%; The true comparable EPS can be taken from screener.in = 4.62;

)- June 2013, tax rate was unusually low at < 15%

Cons:

)- Tax rate for the recent quarter stood at 28% - a historic high. The Sep 2013 quarter had a similar tax rate too. Can a senior comment on this?

Estimates:

I did a spreadsheet to project. Assumptions are below:

(1) 28% tax rate going forward and 30% EBITA growth y/y.

(2) Shilpa trades at 20 PE, end of Mar '15.

=> We get a target price of 535.

I still hold expecting explosive positive surprises beyond the 30% growth.

Triggers:

I’ve taken these from IndiaNivesh report.

(1) USFDA approval - Still pending? Expects approval anytime now and major production ramp up only beyond Mar '15;

(2) Anti-HIV drugs - No idea if this has already started contributing. Expects to drive 200 Cr revenue (vs 600 Cr total revenue now) in next 3 years.

(3) Andra Jadcherla formulation facility - Only 2016 onwards.

Should we exit a portion of our holdings and try something clever here, if we are able to time the triggers? :slight_smile: On one hand “reasonable expectations” of 30% growth seem to produce 10% or below upside in the next 9 months, and on the other hand big triggers are pending and there is not much visibility on what has begun playing out.

Thoughts?

Thanks,

-Prasanna

The posts of Santosh Sinha and the actual results put up by Ramesh Kumar say it all.

Expectations versus reality.

The results in terms of Net profit / EPSdo seem disappointing compared to the expectations. EBITDA seems to have growth decent 60% YOY (expectation was even higher) but higher tax expense and low other income makes it look really bad.

Particularly in case of Shilpa, I would bother slightly less about the quarterly picture till there is some explaination from management. But the issue is that they dont do result call or press release atleast to explain the reason for those variations. Given the potential,a bit of transparency on expectations about US FDA, HIV drug and business as a whole can go a long way increasing the acceptable multiples for this company. Otherwise 20 times forward or 25 times trailing is the ballpark peak multiple.

I exited around 480s much before results. Do u all think that coming back in around 450s is worth ? Comments pl. in my view, the result was below par but multiple triggers r ahead as the Daljit camp

Hi Donald,

What is your take on Shilpa after a very poor Q1 ? Q1 should be completely ignored ? It looks fully valued/expensive in short term.

Going forward growth/earnings will be lumpy ? or US FDA is the onlybiggest trigger for this business.

Would appreciate your comments

Thanks

Was valuepickr able to do a management meet with Shilpa? I couldn’t find it in the home page…

From the Annual Report:

This is perhaps the worst annual report I’ve read. Nothing specific about their company, mostly generic stuff about industry. This is to be expected - Ayush, mentioned that they are super secretive and don’t open up easily.

Updates on Growth Triggers:

1). Completed capacity enhancement / modification forCapacetabine

2). Expansion Projects of Unit-I at Raichur for newProduction Block, Onco & Non Onco Ware-houseare at an advanced stage of completion.

3). Formulation plant at Raichur is progressing as perschedule and expected to be completed during thecurrent financial year.

4.Nu Therapeutics Private Limited (NTPL), a SubsidiaryCompany has posted a loss of Rs.41.84 Lakhs against Profitof Rs. 3.06 Lakhs in the previous year. Installation of newpacking machine has been completed. NTPL is awaiting forthe approval of Government for its new products.

5). Raichem Medicare Private Limited (RMPL), a joint ventureCompany with Italian Company, has earned a profit ofRs. 62.85 Lakhs from investment of surplus funds. Civilconstruction works are in the final stage and the installationof plant and machinery is going on at the plant site at Raichur,Karnataka. RMPL may commence its commercial operationsby end of this financial year after obtaining the necessaryapprovals.