@hitesh2710 there seems to be buying interest in Dishman Carbogen, with good volumes coming in.
If anyone can throw some lights on results!?
Dishman Carbogen seems to be coming out of a 5 year downtrend with the recently completed successful audits by the EDQM, AIFA and Japanese PDMA. Not only do these approvals open up incremental revenue opportunities, but this should finally enable the company to utilise Bavla much more relative to international French/Swiss operations and hence improve the margin profile.
As a story this reminds me of Piramal Pharma a couple of quarters back. This is an innovative CRAMS business with largely international operations and a management overhang (due to IT raids in 2019), offering deep value at 1.2x PS/0.5 PB. Recently significant Capex also has been completed and the France capex is scheduled to go live in upcoming Q4.
Eventually these are lumpy businesses and margins/revenues seem to be at an absolute bottom here last 3 quarters, in good times this has been a 25% OPM business. In general pharma tailwinds are now evident across the board and this is one company which should finally be able to use the completed inspections to significantly improve thier profitability/revenue profile, if not starting from results today but hopefully as things kick in in Q4â24 and FY 24/25.
Disclosure : Invested in self and family accounts and biased. I am not a SEBI registered advisor and this is not investment advice.
7 Likes
Hi
Yes this company can be a multibagger from this levels as now bavla facility will start production after succesful edqm inspection plus french facility for next yr will add 20million euros plus indian crams business they can reach to 40% operating margins which they used to do precovidâŚas pe there latest concall fy25 they can do 20% ebitda and by next fiscal they can do ebitda of 25% with 15% topline growthâŚcompany available at a mere 12pe forward fy26 earnings
Because of management issues in past, it raids and issues related to goodwill recognition of 1000 crore, edqm issues this company is not getting desired valuation but once they start showing better results with 25% ebitda there might be a rerating on the cards.
Any senior members @Lynch any updates on the it raids outcomeâŚi couldnt found out what was the penalty levied on the company and is the matter closed or still ongoing?
Disc
Recently added and looking to add more in current volatility
3 Likes
Results are out.
Need to wait until FY25
Anyone tracking this firm? If they can share with the group a bit of history about their merger, goodwill on balance sheet etc. Also I agree the stock offers a good margin of safety but I felt management to be a bit hazy and lazy. What are the views?
I am invested from lower levels.
History prior to 2006 is irrelevant as there was already some relationship b/w Dishmanâs Europe entity and Carbogen (owing to JV). In 2003, Solutia filed for bankruptcy and Carbogen+Amics being Solutia subsidiaries were available perhaps for cents on the dollar. So Dishman Europe acquired those assets in 2006. Continued to operate those assets while carrying foreign denominated debt which continued to swell up all through 2006-2017. In 2017, Dishman India entity (holding entity) decided to reverse merge itself with its subsidiary Carbogen Amics. That led the Goodwill to swell up to almost 4000 crore and has been there ever since.
Around 2019 there were IT raids and a massive blow to corporate governance. Company tried calming the domestic institutional investors but failed to do so and thus saw exit from a lot of MF houses.
Then covid happened and costs+debt kept on swelling up. All issues combined+mismanagement of balance sheet, the market started neglecting the company to the point that the company became valuation-wise very attractive. So again saw some interest from institutions (FIIs mainly) around early 2023.
Operationally, they have problems managing employee costs, interest costs, currency fluctuations, operational capex, compliance upgrades owing to which you see one-offs every quarter; essentially any cost structure you look at is poorly managed. Some of the unstated problems can be siphoning off money (I am alleging, donât have any proof, hearsay from fellow investors).
Coming to Promoters, there are a couple of issues. First is, succession. I think till now the Chairman held shares in his name and only recently there has been some inter-family transfer of shares with stated reason being succession. Operationally, Chairman son Arpit is the Global MD (and you know the story). So I donât find him to carry rigour (or maybe there is lack of talent) to turnaround the above started issues around, at least effectively. Because he has held the helm for quite some time now but every quarter two things are pretty consistent ; one-offs and assurance that things are turning good.
PS. Apritâs weddingâs video was put up on Youtube flashing big fat Indian wedding with Rolls Royce exchanging hands and I personally find it a signal of non-serious business people.
8 Likes
I am sharing the video below of an in-depth conversation about De-cal, aka Dishman Carbogen. Please watch the video for 1 hour and 20 Minutes on the timeline.
https://www.youtube.com/watch?v=3uFMw3KeTzg
Both Sajal Kapoor and Aditya Khemka have shared their views.
I am not invested.
I hope you find it useful
dr.vikas
1 Like