Please read this thread from the starting.
The red flags have been mentioned by fellow members.
Disclosure : Invested with around 10% of my PF
While it is impossible to be certain regarding management, the fact that the company continues to grow while maintaining a debt free nature is reassuring. Usually when debt keeps ramping up to fuel growth there seems to be more cooking of books.
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In their Cash Flow you will notice that, their profits are not getting converted into cashflows, which gives a negative picture about a company. This may be the reason for skepticism, but from past one year they have started focusing on cashflow, even I heard them during concall putting stress on cash equivalents, cashflow,
That also you can see on their balance sheet where cash and surplus are 500 odds crores and CFO for FY21 is 266 crores which has never crossed 100 cr in past even though company had good profits.
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Smart money… hmm… They must know something which i don’t.
Check first 3 min of video 
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Hi I did a very quick rough working to understand the concerns regarding the cash flow over the past 4 years -
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I suspect their sales and cash is not real. When we compare Caplin with Granules & Gufic(both companies almost in same kind of business) on a valuation & fundamental perspective will get more clarity. Price of a business usually inline with the underlying value over a longer period if the business grows constantly, unless underlying value not easily understandable(eg ITC). This is the basic market dynamics. Caplins business is very clear.
My views are biased.
And what are your findings ?
Please also check the analysis here:
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Hi
Do you have any indicators regarding sales and cash fakeness.
If the cash was not real , then the money for investing in their US business would not be possible.
Granules and Caplin are not same kind of business. Granules go for bigger drug,caplin goes for smaller drug. Granules-North america, caplin-latin america, Granules-typical US serving generics drup manufacturer, Caplin - manufacturer, outsourcer, importer, distributer
Is there any reason, why you are suspecting the sales and cash not real?
Since the cash is part of the caplin point standalone company which is in india, i doubt auditors miss such a volume of money
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My assumption relating to sales and cash are not real not based on books.
The company was quoting a market cap of 5500crore in 2017, since then it more than doubled the business with cash flow. In Aug17 share price was 770 then came down to 200 levels without any deteriroration in fundamentals. Meanwhile we cannot ruled out the fact that company has moved from 30%CAGR with negative working capital to 20%CAGR with 95 days receivables. During this period institutions almost get out from this.
When looking at the chart it has made a double top at 950 where serous selling pressure comes and free falling towards 680-700 . It is evident from chart that even at 680 to 700 levels also bulk money not entering.
In the pharma universe(it is not a 100% pharma company) it is one of the few companies with consistant growth of more than 20% with 0 debt. Still it can grow at 15to20 CAGR for the next 5 years without any debt. When we compare the peers with same kind of return ratio with growth momentum has expanded the price atleast 100%. On a one year forwarding PE it is at 16 and it looks very cheap based on growth and nil debt status.
The street do not like to enter in this company even at 680levels(5500croe market cap) despite good fundamentals that shows still the company is overvalued?
The book shows everything good and comparing to other companies it is cheap, but peoples are not buying at this price means they are not convinced.
I personally believe sales are inflated(cannot establish). Last one year chart shows 80% of the time price close at days lowest point.
Welcome to counter points.
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Fair points…
but i think its unfair to equate…”price not rising” with “something must be wrong” ….
on the contrary…a lot of times…when collective thinking changes from “something must be wrong” to…”it really is very cheap”
thats when re-ratings happen…n often generate a lot of alpha…
If only the markets were this efficient…
Price are more driven by future growth prospects as compared to what you are making right now.
You yourself pointed out the deterioration in working capital and growth on which the market reacted. And it is very likely that the trend will continue on the accounts that they are entering regulated markets with intense competition. Can they enjoy the same margins in US?
Predicting growth for Caplin is difficult as compared to other companies because Caplin is still largely operating in unregulated markets which are riskier and unpredictable. Caplin’s venture in USA and other regulated geographies is something that was promised and is considered the next leg of growth but entering into regulated market is something new for the company they are yet to prove themselves out there.
My reason for investment is largely based on management’s ability to execute and walking the talk and because I invested at lower levels.
I’ll wait for 1-2 years to see how their US numbers look like and if they are able to utilise the excess cash they have.
disc: invested and biased.
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Rightly said !
To add a little more…
Past de-rating was a result of shrinking OPM combined with shrinking ROCE.
And no upside re-rating till now is a result of uncertainty that comes when entering into untested waters i.e US for them.
There is no point of fudged sales and earnings because of lack of Cash Flow from Operations, its just the elongation of WC that is causing issues, & that is because of pivoting business.
If CFO was the only criteria for judging fake sales, then just look at numbers of Neogen Chemicals, Tatva Chintan, which command absolute high PE, despite CFO << PAT. And this is because their reason for extended WC is known & future earning trend is clear, and market discounts future earning. And for Caplin trend is not clear, as simple as that.
disc: invested in all 3 from lower levels.
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Results out, looks in line or better when compare to the pharma space. Delivery % in this stock is less than 30% for last 6 months. This may not be an accumulation phase . Even declared good results comparing to pharma space yesterday the delivery% was mere 18. This shows even retail people scare to buy. Today i have trimmed my position to 0.5% from 5%. Technically very bearish in charts .
✓ Revenue for the 9MFY22 grew by 20% YoY to Rs. 957 Cr
✓ Gross margin for nine months and for the quarter ended Dec’21 expanded by 151 bps
and 105 bps to 56.4% and 55.9% respectively
✓ Higher Margins and PAT achieved despite significant increase in input material costs,
especially ocean freight
✓ 9MFY22 PAT is at Rs. 228 Cr up 24 % YoY
✓ Cash and Cash Surplus at Rs. 605 Cr as at end of December 2021 – an increase of Rs 135
Cr over March 2021 balance.
✓ Free cash flow stood at Rs. 175 Cr as at Dec 21
✓ Receivable days stable at 94 days as at Dec 21
Key Business highlights:
✓ Company has realized cash profit in excess of Rs.1,000 Cr in the last 3 years and 9
months.
✓ Caplin Steriles receives first Ophthalmic product approval from US FDA.
✓ Company’s CRO wing Amaris Clinical received EIR for US FDA virtual inspection.
✓ Company’s liquid assets (Cash, inventory & receivables) at Rs.1,140 Cr.
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Hello folks, here after a 2 year hiatus! Had a few hours free and was going through old debates, crazy where this started and where its at right now. Some of the earlier mentioned names like Parekh Aluminex and Lakshmi Energy were names that were mentioned alongwith Caplin, and I just did a quick search, these companies are not even traded on the exchanges right now whereas Caplin has gone from Rs.14 to Rs.820 in this period (split rates).
One thing I realized over several interactions with Pharma analysts and experts in India is that, there’s VERY little knowledge about ROW markets. Analysts only seem to have knowledge on Domestic and US markets, and very limited on ROW. I guess thats also because there are such few companies that have successful pure play ROW business like the one Caplin has.
Regardless, personally I feel the next 5-7 years would be very interesting for the company in the grand scheme of things, with their entry into larger Latin American markets and consolidating US markets. They’re also getting into Oncology, API, CRO, etc. We hope they have the right team and bandwidth to execute well, but if we go by past records, its comforting. Along the way they have validation from people like Ashish Kacholia, Fidelity, Principal Asia and multiple other FIIs that have a stake now.
Disc - Invested from 2012 
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just FYI…Ashish Kacholia has exited now
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Ashish Kacholia exited in July21.
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Anyone knowns if he’s fully exited or pared it down to less than 1%?
It looks he exited completly.
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