thanks @mparadkar. the initiation report is incredibly small
Todayās management interview - http://www.moneycontrol.com/news/business/see-20-revenue-growthfy16-granules-india_3029561.html
Metformin (forms 27% of revenue currently) capacity is being increased nearly 4-folds.
Disc: invested
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Breaking news !!
http://www.bseindia.com/xml-data/corpfiling/AttachLive/F28F9608_D947_4BFE_B14D_9E46CF6659B9_164540.pdf
Granules receives FDA nod for ibuprofen
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Can you provide the market/opportunity size for Ibuprofen in USA which would qualify this as breaking news?
Tried searching on Google, see mostly paid research reports.
Currently Ibuprofen forms 16% of total revenues for Granules. Is Granules not exporting Ibuprofen to US as part of exports? What does this ANDA approval signify?
What steps are involved once an ANDA is approved before commercialisation can be done and what are the timeframes? Any experts on the sector please pitch in.
They already had approval for 200mg way back in 2010, this is for 400, 600 and 800. I would imagine Ibuprofen being a popular drug the market size would be big and so would be the number of players with approvals. I could find about 20 names approved for various Ibuprofen dosage on the orange book. Some one who is familiar with Ibuprofen and its technical/chemical name can dig out and provide accurate numbers.
On a related note, found this article relavent to the discussion.
And yet today, almost 25 years after the expiration of the ibuprofen patent, Advil still owns 51% of the market. Thatās more than twice the combined share of all generic ibuprofen products, despite the fact that Advil is functionally equivalent to its rivals and quite a bit more expensive.
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As far as I know Shasun is the largest producer of Ibuprofen and they are entering US formulation on their own too.
Based on the Orange Book data it appears that Ibuprofen up to 200 mg could be sold over the counter without any prescription and Granules had the permission for the same since 2010. But Ibuprofen above 200 mg requires a prescription and Granules did not have a permission to sell the same. Now, they should be able to sell prescription based higher dosages(400mg, 600mg and 800mg) on their own.
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Ibuprofen maximum dosage use in adults is 400,800 Mg so this will be big boost up if things work out in their fevour. India brufen is brand leader & in combination with paracetamol combilam.
Assuming an EPS growth of 30% over FY 15 EPS of 4.5 (as per Annual Report) we get an EPS of 5.85 for FY16E. I have not accounted an equity dilution of about 10% over the next 18 months due to promoter warrants. Letās assume EPS will even grow higher to negate the equity dilution.
At the current price of 130, it is trading at 22 times FY 16 EPS and 29 times current year EPS. For a company with no free cash flow, Capex intensive, relatively high D/E is it not expensive? The price is running ahead of its fundamentals?
Compared to this, Repco and PI are trading at similar valuations (a bit higher) and have better visibility and financial metrics, cash flows, better promoter (?). With this logic Iām not looking into Granules besides not being convinced about promoter somehow (I could be proven wrong just like many times before).
Disclosure: Not invested in Granules but invested in Repco and PI Ind - so holding bias could be masking my thinking!
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Like seriously? What is current year EPS? 21st Sept 2015 (Half year almost complete) - Current year is FY16.
Am I missing something really? When did markets start reverse discounting?
Assuming earnings growth of 20% as per management guidance, it is currently available at a PEG of 1.2
Neither expensive nor cheap.
Management integrity is a different ballgame (no comments on that) but itās definitely not expensive as per current valuations.
Disc - Invested at much lower levels and hold Repco as well
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I liked your sarcasm and so liked your post.
You could have thought that it was a typo as I was also referring to āFY 16ā in the same sentence so instead of taking the gist of what I was saying, you chose otherwise and use terms like āreverse discountingā which I actually do not understand as much as you would. In my opinion, what you missed in my post is ābroader pictureā, in lighter vein.
You put your opinion on PEG and hence on the valuations and I respect that as every one is entitled to have his/her as I did mine.
Anyway, thanks for taking time to reply to my post.
Like your spirit 
Anyway - howād you arrive at 29 times earnings calculation?
And if you used FY15 earnings numbers - then thatās what Iām saying instead of looking forward at FY16 EPS, youāre looking backwards at FY15 EPS.
Or unless you believe FY15 EPS = FY16 EPS (which is a different and debatable point of view)
Hi mods - we are just involving in a healthy debate.
You are right, I used FY15 EPS of 4.5. 131.5/4.5 = 29.2.
In my original post, I have also estimated the FY 16 EPS as 5.85 (so Iām looking into FY16 as well).
2 points to extend what I wrote on my original post,
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On FY16E EPS, at current prices, PI Industries is at 26 PE, Repco is at 24 PE, Granules is at 22 PE. So I felt at these valuations the other 2 stocks are making more sense for the reasons mentioned above. My opinion!
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While I wrote FY16E EPS in above point, we only have results of 1 quarter for FY16 and calculating completely on FY16 PE might be a bit over the board while I agree that we should look forward in stock markets and I agree to your point on this.
Thatās it and I really would like to know your opinion on GRANULES investment case so I can dig further, so please put your views.
Hi, how did you get EPS of 9? The recent Motilal Oswal report pegs it at 6.8 only!!!
Have you taken into consideration the recent equity dilution into the calculations?
Agree, even Iām looking at an EPS of around 6.5 for FY17. Whatever ANDAs, Auctus APIs commercializations, JV with omnichem will start bearing fruits from FY 17 mid / FY 18. If everything goes as per expectations, by FY 20 we will see full impact which is 4 FYs from now but of course market will discount ahead of these events but I feel FY16 is a bit optimistic. We should wait for company to deliver on one major promise? I know that we may miss some upside but we will ride the surer upside then.
So hereās the potential business impact of the recent Ibuprofen FDA approval
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FIIs have increased their holding to 7.25%, which was 2.85% as on June 30. This shows a 154.38% jump in FIIs share holding in the company. For the first half of the current fiscal, the FIIsā share holding in the company has surged by 79.45%. FIIs holding in the company was at 4.04% as on March 31, 2015ā¦
Granules has also seen good interest from domestic mutual fundsā¦
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FY16 EPS is only going to 6 (best case estimates factoring in the recent Ibuforen numbers). At 30PE upside is capped at 180. Itās already run-up too fast to 160 odd levels. There is going to be a lot of time now for the stock to consolidate and FIIās to nibble into slowly. Also gives us the opportunity to add moreā¦
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Question : why should not market start to factor in eps as on Sep 2016 ( 1 year forward) or perhaps Mar 2017 ? Question : why should pe be capped at 30 ?