About the company
Everest Organics Limited is a Company incorporated in the year 1995 as a public listed company engaged in the business of Manufacturing and sale of Active Pharmaceutical Ingredients and Intermediates.
● Dr. Sri Kakarlapudi Srihari Raju, (MD, MBBS), is a Promoter and Managing Director of the Company.
● Everest is in the business of Manufacturing of API’s for more then two decades.
● EOL API manufacturing site is located in Sangareddy District, Telangana, factory area occupied in a total area of 33 acres of land of which 10 acres of land covers the infrastructure and remaining 23 acres of land is covered with green belt.
● Due to its strong R & D Capabilities, Everest offer various kinds of services in addition to supply of APIs. It undertake long term contracts for manufacturing intermediates and development of new APIs.
Products and Development
− The state of art USFDA facility at a single location has nearly 15% of global prazole market share. The portfolio has diversified beyond prazoles and includes Omeprazole, Esomeprazole, Pantoprazole, Fenofibrate, Dexlansoprazole, Rabeprazole, Itraconazole, Rivaroxaban and Febuxostat.
− Strong R&D Capabilities leads to enhancement of portfolio.
− Enhanced focus on anti-viral segment, Oseltamivir (under commercial stage) and Remdesivir (under lab scale trial).
− Supply to more than 40 countries, strong presence in South Asian countries.
− In the process of registering products in China.
− Exploring Regulated market opportunities in US and EU.
− EC clearance received for 3X expansion in capacity. This would also enhance R&D capabilities.
Financial Snapshot
− FY20 Revenues of Rs. 168 Cr.
− FY20 ROE, ROCE are at 33, 35 respectively.
− FY20 D/E is at 0.4 and is reducing YOY.
− FY20 PAT of Rs. 10.9 Cr.
− MCap at 204Cr and 18 price multiple @ CMP 270 on 24.12.20
Shareholding as of March 2020
− Total Share Capital: 8 Cr.
− Promoters hold 73.79% and Public Holding 26.21%.My Views
My Views:
Cons:
● Major client base and their dependency data is not available.
● EOL Planned CAPEX to increase capacity to 3× and environmental clearances already got but how will they raise the funds and when the CAPEX will complete are big factors as their leverage ratio is high now
● Highly competitive API sector
● Any policy change from domestic and foreign may affect the demand of its products.
Pros:
● In response to the changing conditions in this key market especially Chinese market, the company’s Active pharmaceutical Ingredients and Intermediaries manufacturing business has seen a greater traction. In FY 2019, revenues from API’s grew by 38.56% over FY 2018. The strategy of building sustainable and growing API revenues involves deeper customer relationships, new product portfolio and ramping up of base businesses in key geographies.
● It has been remarkable success story of growth, with investment in right places especially in upgrading pollution control your company has successfully achieve not only higher top line and eventually converted them to sustainable bottom-line. With strict norms in China regarding polluting industry and overall business environment between US-China, your company is strongly placed to reap maximum benefit from the same.
● For the first time in the history of Everest Organics the company has declared maiden dividend of 10% to its shareholder there by sharing the wealth in a small way. Let me assure you that this is just a beginning and I am quite confident that we shall be in even better position to create much larger shareholders value in near future.
● Considerably reduction in debt
● 3× capex with rising demand assures the revenue visibility
● Valuations are attractive when compared
● Reasonable credit rating
● Considering the future potential EOL may show good performance.
All are requested to please go through the data and correct me or enlighten me if anything wrong or needs to update.
Thank you
Kalyan
Disc: I had small quantity
