hi hiteshji please view following stock for long trerm 1 ACRYCIL INDIA
2 ADI FINECHEM
CAPLIN LAB
DHANUKA AGRI
FLUDOMAT
KESER TERMINAL
SUPRAJEET ENG
ZENSER TECH
SHILPA MEDI
MAYUR UNI PLASE YOUR VIEW FOR NEXT 2/3 YEAR…
Unichem Lab
Haven’t seen any posting on this thread for a while. Now with all accounting adjustment for the switch from distributor to C&F model behind us and US operation showing positive numbers, what’s your take on this gem?
Thanks
Bharat
Hi Hitesh
Due to provision of deferred tax liability on HFCs like Repco Home, Gruh does not have much EPS growth for fy 15. Profit before adjusting for the deferred tax liability is growing at healthy rate while net profit is not for the same . But deferred tax liability need to consider as part of profit only. Is it the reason the P/E of HFCs showing expensive which is actually not …Please let us know your opinion.
Thanks
Amitayu
amitayu,
I think the DTL thing will get neutralised in fy 16 results as the comparision with fy 15 will show DTL provision for both years. So I think HFCs should shown normalised growth. Again in fy 17, provision is to be made of a higher magnitude but I guess by now most of market participants are cognisant of these facts.
As long as growth comes about in topline I wouldnt be too much worried about the other aspects. Much of these things ultimately even out over time. Even GIC considered somewhat of a slow grower in the HFC has shown decent revenue growth for q4 fy 15. This should augur well for the whole sector. And with scarcity of good growth stocks in the markets, it seems only a matter of time before the fancy for HFCs should return.
4 Likes
Hi Hitesh,
Thanks for your reply . Do you still follow Granules? Auctus already turned around. Their high margin formulation business (FD) will go up to 65% of sales in future (already 40%).Looks like JV of Omnichem will also bring revenues FY17 onward . Overall the story seems on the inflection point. Please throw some light on this.
Yes granules seems interesting at current juncture. As discussed earlier in my write up, the company seems to be a candidate with growing sales with improving margins. The plans have taken a bit of time to play out but now it seems to be on a good wicket.
3 Likes
Dear Hiteshbhai
Have you looked at Kolte Patil ? It looks to be a extremely clean management & stock should do well provided visibility in future earning and projects on hand. Auditors are Deloitte & rating done by Crisil. The investor presentation on there website will give you lots of clarity on there future earning rationale. If possible have a look at the company and give your feedback. Thanks
Hi Hitesh ji,
I want to understand the differences between a Granules and IPCA business model.IPCA is into branded and generic formulations,they have their own APIs with approved DMFs and create finished dosage or formulations themselves.Now this formulation can be branded or generics and they push it to market through Medical representatives where doctor provides the IPCA medicine name in prescription.One question I have is IPCA ships medicines in USA to selling and marketing partner,is this because they don’t have a team in USA and need to market the medicines through a partner?They mentioned partner decides marketing strategy/Price etc. and IPCA receives only commission.Is it very difficult to setup a team overseas or any other reason for not employing own people in other countries?
Now coming to granules ,they are bulk drug manufacturers and slowly moving up the value chain,they are targetting 65% revenue from FD or formulation in future.Does this mean they are also moving into prescription drug zone and will need to engage own people or 3rd party selling/marketing partners to make their drug prescription drugs ?can you please help in clearing my doubt?
1 Like
manish26,
I dont have much idea about kolte patil as I tend to avoid realty stocks altogether. though some interesting stocks in the sector could be ashiana and sunteck realty besides kolte patil. But bcos of difficulty in predictability of revenues I tend to avoid these.
anindya,
You seem to have got most things right in ipca vs granules. IPCA is predominantly a doctor facing company where their MRs visit doctors and doctors prescribe their drugs. The also make raw materials API but some of it is for captive consumption. They also tried their hand at US markets wherein they dont have their own front end marketing tead. Companies in their initial phase in US dont have front end marketing and have to rely on partners based on profit sharing or commission. Once these companies attain critical mass in USA they go on their own with all the risks and costs.
Coming to granules it doesnt have any presence in the doctor facing segment. They have over the years migrated from API to PFI and then to finished dosages. They will mostly remain bulk suppliers to their partners in exports. You can consider it to be a B to B type of company. The story here is about improving margins by moving into higher margin products from APIs to FD.
8 Likes
Thanks a lot hitesh ji for the explanation.Now it all makes so much sense.For prescription drugs a company(IPCA) must have large number of MR/marketing team employed,and without a critical mass it’s not really possible to breakinto this segment as costs increase significantly.Margins/volume etc. will definitely need to be much higher for a IPCA than a manufacturer like Granules.
I was reading granules Q4 conference call transcript and could not quite understand why they needed to setup a US division when they sell through partners.Now I understand that they want to market/sell OTC products themselves to retail chains for increasing margins by removing the sales partner (Means they consider they have achieved a critical mass/scale for OTC)and still sell prescription drugs through their partners.It’s like a first step of going on their own starting with OTC products.
1 Like
where i can listen to concall
Hitesh,
Do you following SKM Egg Product company?. They seem to be debt free and looks like turnaround last year. And they have strong MOAT. Due to last quarter result not good it came down more than 30%. Please let me know your analysis on this company?
sathish kumar,
I dont have much idea about skm egg products. But I remain bullish on a similar company providing shrimp feed which is avanti feeds mainly bcos of intensive work done by valuepickr team on that. We get a lot of ready made information on avanti beginning from company details to management q&a.
rgds
hitesh.
Hello Hiteshbhai
Could you please help me with pharma stocks for investment.They are showing great numbers & have tailwinds to back them; but i dont understand pharma very well. I wanted to invest around 15% in the sector. I have few pharma companies I have looked just the numbers but dont understand there business model very well.
The stocks which I have shortlisted are 1) Suven 2) Torrent Pharma 3) Ajanta Pharma 4) IPCA 5) Alembic 6) Granules India
Should i make a basket or invest in 1-2 names. Request you to give some insight.
Regards
Manish
hello sir,
Been observing KSE & read about the note on it on this forum…wat r ur views on it , it being into cattle feed & valuations dont look that expensive.Thnx in advance.
Regards,
Jugal
hi hiteshji please view following stock for long trerm 1 ACRYCIL INDIA
2 ADI FINECHEM
CAPLIN LAB
DHANUKA AGRI
FLUDOMAT
KESER teminal
ZENSER TECH
SHILPA MEDI
MAYUR UNI PLASE YOUR VIEW FOR NEXT 2/3 YEAR…
@manish26, If u are not too confident about a specific pharma co then it does make sense to invest in a basket of such companies. The stocks listed by you are all good companies so you can buy them as a basket and then treat it as a single entity.
@jugal, I havent read the KSE thread so not much idea on it. Would go thru it and get back.
@pramodjain, From among your list I track dhanuka, shilpa and mayur which all seem to be fantastic businesses. Among the others I dont have much idea. You can go thru the respective threads on VP and get a better idea than me taking a call for you.
Hitesh,
Is it better to enter Shilpa Medicare now OR a year later considering there projected revenue growth is just 5-10% for this FY and the better triggers are expected in next FY only?
Also, whats your opinion on Hawkins turnaround in this FY considering past 3 poor Qtrs and consumption demand still being low but competitor TTK seemed to doing better?
Ashish.
With cases like Shilpa, where it seems the story is well known (I feel so bcos price did not correct much despite a couple of lacklustre quarters), it might make sense to buy and wait out the time. One has to consider that for one year he will have no or low or even negative returns but if longer term story is intact one can buy and sit tight.
Regarding Hawkins I think the slashing of dividend from 60 to 45 has been drastic. Almost 25% cut. And with growth visibility being cloudy one will have to view it in terms of PE rather than dividend yield. Considering a sluggish fy 16 and flat earnings, one can consider an EPS of 60 as a base for projections. And when a lot of frustrated investors and many of them with borrowed conviction rushing for the gate, price will tend to suffer and go even below fair value. So it might be wise to be patient and wait for the price to settle in a range before taking a call. The more prudent course is to wait for growth to return and even buy as high as 2500-3000 rather than buy and see stock continuously going down. Those who are stuck with it have no recourse except to bear the pain and wait and hope for gain.
8 Likes