Arvind remedies - on radar for likely breakout

Stock Opportunities
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Investment Case

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Technicals - Technically the stock is currently oscillating between 44 and 54 afterbreakingout from a formation of a double bottom at 25 and 27 and after crossing the strongresistanceat Rs 35.On closing above 55 onconsistentbasis, the next target appears to be Rs 85.It is trading at about Rs 54 currently and would move into bullish orbit on crossing 55 convincingly.

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Comments invited from the technical analysts in the group.

Background -Arvind Remedies is a pharma company having domestic presence and exports to Africa, CIS and Asian countries.

It has two manufacturing units - one in Kakkalur and the other inIrungatukottai both inin Tamil Nadu.

It manufactures two categories of products- allopathic and ayurvedic. The list of products can be accessed athttp://www.arvindremedies.com/products.asp

It is also engaged in contract manufacturing for companies like Sun Pharma, Wockhardt and other not so well-known customers.

It has the following subsidiaries -Arvind Wellness Ltd(100%) andCoronet labs Private Limited(63.75%) in Roorkee.

Also it has opened a new subsidiary Arvind Remedies USA LLC for US operations.

the current market cap of the company is Rs 270.76 crore(http://www.moneycontrol.com/india/stockpricequote/pharmaceuticals/arvindr )emedies/AR06)and last FY consolidated sales were 706.89 crores (http://www.arvindremedies.com/subupd/Annual%20Report%202013.pdf ). The latest quarterly net profit is 16.5 croreshttp://www.arvindremedies.com/subupd/fst%20quarter%202013.pdf.

As per the June 2013 filing the promoters have a 45.47% ownership of total equity. Warrants for Rs 1.9 crores have been issues at Rs 25 to be exercisedby Jul 2014.

For last 10 years the sales have grown each year consistently from 125 crores to 707 crores and net profit from 2.75 crores to 48 croreshttp://www.screener.in/company/?q=531823(thanks Ayush/Pratyush Mittal for this tool).

The triggers for Arvind Remedies seem to be its consistent growth, low PE of 5.63 (one of the lowest in Pharma) and the potential approval of itsIrungatukottai unit by US FDA.The quality of promotors is not known.

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There seems to be an undercurrent in buying in Arvind Remedies today; this could be kept under watch with an eye on results tomorrow.

Disclosure: am invested in this stock

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Quoting some random guy at the equity desk:

http://www.theequitydesk.com/forum/printer_friendly_posts.asp?TID=261

This is one of JUNK stocks listed on our exchanges. Others that I know of are Arvind Remedies, Surana Telecom, Bhagyanagar Metals where promotors keep buying/selling and creating speculations in the markets and then profiting through them. The primary bussiness of these promotors is to earn money not through their bussines but through rumours/speculations of their companies. Stay away from these.
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There is something fishy about this stock. For the past 10 years the profits have gone up 30x, but market cap has not kept pace. It has not really created shareholder wealth.

When I was digging into it - a few red flags I found are:

)- Promoters are allotting themselves shares for the cheap. They are allotting warrants at Rs. 25/share, when the current market price is around 50.

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Agreed. Also the company has huge loan of 350 Cr and it have been increasing every year.

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I believe price decline from mid Sept is temporary and will end in a couple months max, this is a strong company and 10 EV/EBITDA for a 20% revenue growth is too cheap! Here is more detailed discussion: http://intwits.com/india/stock/ARVIND/