The extremely high PE enjoyed by titan was bcos of its gold on lease model where it had robust cash flows. Now that model has been put under a cloud due to govt policy.
Stock is now undergoing a derating bcos it will have stress on cash flows. How much derating occurs is anybody’s guess. when this happens it is better to wait on sidelines than be courageous.
There will be bounces in between but overall it would be wise to side on sidelines.
Hitesh bhai,
Just wanted to share an observation. Near my house there are so many pharmacy stores and they all make a good business. sometimes, customers have to wait for a long time to even get their attention. you don’t see such a thing in other non pharma related stores. i think this sector has a huge potential. I am thinking of adding and holding some pharma even though I don’t understand the business. In this regard, I need two inputs from you. Your valuable inputs would be of great help
1). I have added Sun pharma,Lupin, Glenmark, Ipca, Torrent, Ajanta, Unichem, Alembic to my watch list. In the above list, do you see any avoid due to whatever reasons?. And is there some company that you recommend adding to watch list?. ( Please note that, it doesn’t necessarily mean, I will buy them or buy them at the current valuation)
2). What do think about the impact of regulatory risks in this sector. The recent titan story was scary.
gautham,
Correct observation. the treatment seeking behaviour of patients has changed due to higher affordability. People now take treatment for even insignificant problems.
pharma sector over the years has been a big wealth creator if u can latch on to quality stocks at decent prices.
govt regulatory risks are it seems everywhere. But since India is mostly into exports of pharma, I dont see govt tightening the noose too much.
Once this drug pricing policy impact plays out pharma stocks can again be in the limelight.
Regarding the list, u can add FDC – a stock with limited downsides and if any trigger plays out upsides could be huge.
Hitesh bhai,
Ajanta has breached 800 now. Should we start buyig in a stagerred manner or should we wait?
Regards,
Ankit
The answer remains the same as before, Let the stock price settle down and stop making new lows and consolidate. Its a lot more fun buying a stock going up rather than the one going down.
thanks a ton Hitesh bhai for your inputs. much appreciated
Thanks Hiteshbhai
Why Cipla is not considered as a good pharma stock?
Hi Hiteshbhai,
Ahmedabad based Intas Pharma has filed papers for its IPO. Kindly let us know what is your perception of the company and the promoter group.
The promoters of the company are the Chudgar family, Intas Enterprise Pvt Ltd, Equatorial Pvt Ltd and Cytas Research Ltd.
@niraj, cipla is a good defensive pharma bet.
@rudra, intas has good products range. no idea about promoters.
**@Hitesh thanks for the reply.
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When you say “defensive”, does than mean low returns compared to other pharma companies like Lupin, Sun etc or you mean a fundamentally strong company with limited downside?
Hi hitesh bhai
I am trying to understand pharma business (as it is currently out of my circle of core competence ) . It will be great help of yours if u can give some insight about sector and how to find a winner (what numbers should one see when looking at annual report).
and what about two pharma cos. that i have found to be cheap with my very limited sector knowledge.
Mcap 360 cr.
sales 1600 cr.
interest cost 116 cr. (due to high debt bcos of fccb . but they are making good profit and growing at 20%.)
mcap 330 cr.
sales 1300 cr. (last year that had all kind of issues.working capital shortage , huge interest cost again due to FCCB and environment issues )
Now as i heard from media and one of the lenders orchid most probably will receive $200 Mn. from there sell of plant (which contributes 21-23% of sales ) and debt will be reduced by 900 crs. and 200 crs. will be pumped to working capital.
and interest cost saving will be 60% as they are retiring high cost debt and as i read it they have a business which is very capital intensive (so barriers for entry are very high.i dont know anything about it but read in few research report that were covering orchid before trouble started).
will appreciate ur views
Thanks
Kunal Shah (Vadodara)
Hitesh are you still invested big time in unichem?
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When downside?
CIPLA–fundamentally strong company with limited downside
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yes.
@ kunal,
In pharma space U want to be looking at patient facing companies.
These nectar and orchid are bulk drug companies which are run of the mill companies.
The companies that generate doctor’s prescriptions are the ones which can grow very well.
And avoid debt laden companies at all costs bcos most of them go under if debt is too high.
@Hitesh sir,
Some small stock which have done well in the past have been place in il-liquid category by BSE so should one still buy these stocks or avoid them completely since if they are not traded much then money might get trapped in such stocks at a later date when we want to sell them.
Kindly look at the list and suggest if they are good buy or not
1.Kovai Medical center
2.Indag Rubber
3.Puneet resins
4.Jolly boards
5.De Nora
6.Benaras Hotel
7.Ludlow Jute
8.khaitan
9.Borosil
10.Bambino Agro.
11.VST tiller
Thanks
Thank you Hitesh Bhai for valuable word .
Will be looking forward to learn from you .
and one more point how the Rupee dep. affects pharma companies.
Kunal
amongst your list, I think vst tillers is the only one I know in details about. Around 330 levels there was lot of undervaluation there. But since those levels there has been 20% run up.
Among the other names, kovai and indag we have a thread. Others no idea.
Personally I wont go for any of these names.
hitesh.
Hi Hiteshji,
I could not understand your comment on bulk drug manufacturer and doctor’s prescription pharma company.
Thanks!!
