Not really a concern.
You can make note of this and see any similar kind of doubtful actions going on in the company in near future. Then you can connect dots.
But as of now I don’t see any problem here
Disc: Invester
1 Like
A great inspiration. It is not that easy to succeed being a 1st gen entrepreneur. Hats off!
Company is planning for next capEx. Any idea?
Please see the investor presentation after the last quarter for a detailed account of the planned Capex
http://cmsbox.caplinpoint.net//PDF/December%202020%20(1).pdf
Thank very much for sharing the same.
Hello All
I have been tracking Caplin Point for some time. I am new to financial analysis just wondering about one thing from past financial statements. They do business in many high crime countries but in last 10 years they never declared even 1 rupee in doubtful receivables. I am wondering how are they able to collect every rupee they sell. It may be a stupid question just help me understand.
Thank you. Appreciate your reply.
2 Likes
That’s very good observation!
There are many other red flags on Caplin
I was skeptical of Caplin when they had a very large receivable compared to previous periods but management did a good job of playing down that fear
Subsequently they came up with another scheme. They “acquired” their distributor. The markets forgot that they had first sold inventory to the distributor. When they bought back the distributor, their inventory went up and the reason given was inventory that came from the distributor but they had nothing to say about reversal of sale as the initial sale to distributor before the distributor was part of the company should have been cancelled
All these issues are still lingering in the balance sheet
Recently I think Marcellus cited the same reason for pulling out of Caplin
Caplin cash flow is impeccable, they have kept direct debt to non existent. They consistently show a profit increase. All of these are highly desirable and has given the company generally good valuations however if a cash profit of 100 can give your company a valuation of 2000 and much of that cash profit comes from a jurisdiction where your auditors can’t go and check, there is a lot of room to manipulate. I don’t say they are manipulating but I’d much better prefer a company with some Indian operations. They have been struggling to get their USA sales going.
Even with purely Indian operations Manpasand was given a green light for their factories by Deloitte, whereas they didn’t have any factory to begin with. Most investors saw through the farce except for smaller investors that lost. Investors who are shying away from Caplin have these concerns and for that matter about any company that has a sudden increase in receivables followed by increase in inventory.
They might not be all genuine but there are better bets in the markets when there is so much doubt about the company
9 Likes
As far as I know, Caplin did not do government tender orders till about two years back. Prior to that, they had a zero to negative working capital cycle because they collected money upfront from channel partners. That was one of the reasons of the amazing cash flows for years.
Two years back, they decided to venture into government contracts as well and that’s when the increase in receivables happened. This is why Marcellus has pulled out - they don’t like the shift in business model that has led to this increase in receivables and I crease in debtor days.
Anyone who knows more, please correct me.
Disclosure: Invested
4 Likes
Yes the increase in inventory is worrying. The receivables have also increased in the past few years and this is being reflected in the stock price.
For the inventory increase they did give a reason. I read in Sep’20 report that they increased their inventory because they were getting goods for cheap due to corona scare.
The inventory numbers in subsequent quarters also show that inventory is steadily falling. The trajectory has been 37 → 238 → 180 → 152. This is also getting reflected in the cash flow as well.
if a cash profit of 100 can give your company a valuation of 2000 and much of that cash profit comes from a jurisdiction where your auditors can’t go and check, there is a lot of room to manipulate.
We have been pondering over the possibility of manipulation on this thread since 2012. But I am of the opinion that it should be really hard for a company to cook books for almost a decade.
Disc. recently invested a good chunk.
5 Likes
Am also keep on hearing “cook books” but no sign till now and they got USFDA nod for Milrinone Lactate Injection; Please clarify me if you have more details about book cooking
Honestly I don’t see any evidence of book cooking. Even when Marcellus exited, they did not say anything about the quality of the reporting. They exited only because of not liking Caplin’s capital allocation to government orders and US business which led to inflation in the working capital cycle. Would reqyest anyone who has seen any tangible evidence of book cooking or any other corporate governance issues to please highlight them so we can all be better informed.
Thank you for your reply. Even i am also not seeing any evidence for book cooking. CAPEX is pipeline and they said "it is from “internal accruals” not from DEBT and the same highlighted in the Q3 Concall. Apart from this , they pipelined 3 products for USFDA Nod. Caplin Point Lab’s subsidiary receives USFDA nod for Milrinone Lactate Injection which is having around $25 million market (last year data).
Regarding inflation in working capital cycle: Just a predication and not sure how will it be going affect.
1 Like
Agree with the point. Not able to see any good reason for the mgmt to manage the books as it has not reduced its holdings over time and no debt etc. WC cycle is little stretched now and it is the major concern as we all know. The only thing which makes me wonder is leaving Marcellus aside why other institutions have not shown interest as the price is attractive and story is good… would request someone to share thoughts on the same.
1 Like
I believe its cause of the dropping ROE and ROCE year on year, and the market probably still has a hangover about the fact that it was a negative working capital company and now its got Credit period of 90-120 days which is still normal for pharma companies. feel once the ROE stabilize which it will and perception will change.
2 Likes
Having good cash, no debt high roe is good but IMO the biggest factor for a high PE is growth prospect which look challenging for Caplin. The existing market they operate in is risky. Caplin is desperate to boost its revenue which resulted in increased receivables, they are targeting expansion into multiple countries at once (US, Canada, Australia and more of latin America) to boost revenue with US being their biggest and toughest bet. There are efforts like operating an ecom portal in Guatemala which is opportunistic but again looks like a desperate attempt to me. I mean how much margin would it improve and how many customers would they gain/retain through it?
Having said that I am personally confident in the management that they will be successful in the US and if they are we might see more attention to Caplin from big investors.
disc: invested.
3 Likes
Buy Caplin Point Laboratories, target price Rs 540: ICICI Direct
Read more at:
if anyone has this report please Share
2020-21 Annual results - https://www.bseindia.com/xml-data/corpfiling/AttachLive/5BD0C792-160C-48EB-9704-E1F473F7CE11-131520.pdf
from report:
Financial Highlights
► In line with company’s commitment, Top line of 2015 becomes bottom line of 2021.
► Consolidated Total Revenue at INR 1085 Cr for 12MFY21, up 20% YoY, as compared to INR 905 Cr in 12MFY20
► Q4FY21 Operating Revenue at INR 279 Cr, up 30% YoY, as compared to Rs. 215 Cr in Q4FY20
► Cash and Cash Equivalent at Rs 470 Cr at 31st March’21 as against Rs 284 Cr as at 31st March’20. Parent Company’s Cash and Cash equivalent rises from Rs. 119
Cr in Mar’20 to Rs. 376 Cr in Mar’21, despite investment of Rs. 31 Cr into purchase of Land and Buildings for upcoming projects in 2021/22
► Cash flow From Operations (CFO) at INR 269 Cr in 12MFY21 as against INR 45 Cr in previous year
► Inventory stood at INR 179 Cr as at 31st March 2021 a
Caplin is venturing on a Capex journey of INR ~250-300 cr. to widen its product portfolio and
backward integrate majority of the products
7 Likes
I want to compare the business highlights from Q3FY21 and the outlook they shared to the information we’ve just received.
LatAm Region
| Q3FY21 Announcements | Q4FY21 Announcements |
|---|---|
| Company will shortly be commencing its first commercial export to Mexico, one of the target areas of expansion for the short to mid-term | Company has commenced exports to Mexico in the last Quarter, supplying Injectables as part of emergency procurement from the country |
| Company’s e-commerce platform ‘QuetenX’, part of 10X Healthcare portal, shows continued traction, catering to 1,000+ unique customers with 440 SKUs being sold currently, in Guatemala and Nicaragua. On track to launch the platform in Dominican Republic and Ecuador within next 2 Quarters | Monthly sales through Company’s e-commerce platform ‘QuetenX’, part of 10X Healthcare portal, increases 37% YoY. Currently catering to around 1,000+ unique customers with 440 SKUs being sold currently, in Guatemala, Nicaragua, Honduras and Ecuador. Next targeted roll out in Dominican Republic. |
| Emergency procurements at markets continue, with Company receiving Tender orders worth around $10 million from 3 countries in LatAm | Institutional sales expected to contribute marginally higher in coming quarters, as Company has received Tender orders worth $18 million in 2 of its markets. |
US Markets
| Q3FY21 Announcements | Q4FY21 Announcements |
|---|---|
| Expecting 4 ANDA approvals in the coming 2 Quarters, and launch planning activity ongoing for swift launch of all 4 products. | Company has received 4 ANDA approvals since Jan 2021. |
| Agreement signed with JAMP Pharmaceuticals, Canada for 6 products. Company expects to launch products in Canada by early 2022 | Agreements in place for registration of products in Canada, Australia and Brazil. Revenues expected from these markets in next 18 – 24 months. |
| API backward integration update: Secondary source API for existing ANDAs – 3 completed with another 4 under development. Primary source API – 21 under development | API backward integration update: Secondary source API for existing ANDAs – 7 completed with another 16 under development, for both Primary and Secondary source. |
| Pre-Mix Injectable Bag line and Pre-Filled syringe line to be added by July 2021 and end-2021 respectively | Pre-Mix Injectable Bag line ready for installation with Filing Batches planned in Oct/Nov 2021. |
| As on date, 7 out of 12 approved ANDAs have been launched, with remaining 5 to be launched in next 4-5 months. | As on date, 8 out of 15 approved ANDAs have been launched, with 4 products ready for launch in the coming weeks and the balance 3 planned before Oct’21. |
From the results, they’ve followed through on their targets, and the story is intact. I’ll spend some time to see how these have affected the balance sheet and post an update when I have time.
Edit: I also want to verify how they have 15 approved ANDAs. Surely it should be 16…
16 Likes
Hi everyone,
My question is why such a high growth company is at such valuations (17-18 P/E) - if because of high debtor turnover days, I think it could be temporary, because see the debtor days of top pharma companies in India -
- Sun pharma - 105
- Divi’s labs - 96
- Dr. Reddy’s - 105
- Cipla - 83
- Cadila health - 94
- Aurbindo pharma - 6
- Lupin - 130
- Biocon - 63
- Torrent pharma - 76
- Gland pharma - 83
Caplin - 96
*Source - Screener
Agreed that neither all companies sell the same products nor run on the business model, but the pharma industry has high debtor days, that’s it.
No recommendation just a discussion.
2 Likes
In the last 5 years, what used to be the topline for Caplin point has now become the bottom line but the share price remained where it was.
In my opinion, it’s quite profitable to invest in a company whose fundamentals are continuously improving and the price is coming out of a 4 year long consolidation.
Reasonably priced…high ROE…good cash flow…mngt delivering on promises…low paid up capital…high promoter holding…presence of strong hands (Ashish Kacholia holding 1.16%)…foray into Mexico…usa…Canada going on as planned…capex through internal accruals
The receivables increasing and exit by Marcellus are minor irritants and the positives far out weigh the negatives.
This is a good stock on Fundamentals + momentum criteria.
One point I am not sure here…whether the rally will be a short lived one taking the stock price up to 800-900 or morph into a mega rally spread over next 4-6 quarters. The later depends upon June end closing price. Till then I will hold with modest expectations.
4 Likes