The company is trading at a very cheap valuation of 1xFY26 sales. As per my understanding, the reason is “bear market” + “guidance is revised downward”.
Q1FY25: Company is guiding for a topline growth of 18-20 pc with an EBITDA of around 100 cr for FY 25 ( LY EBITDA was 74 cr )
Q2FY25: The Company is still confident of clocking 80 cr kind of EBITDA for FY 25. Guiding for a much better H2 vs H1.
Then, from 1200-1300 cr topline, they have shifted to 1200 cr topline in the next 4 years.
But, yes, the company is at lucrative valuations. The Panoli plant is expected to start production in Q1. They are guiding for 15% in FY26 and about 20% in FY27, consolidated topline growth.
Sales Projection
Bear
Base
Bull
FY29
1100
1200
1250
MCAP/Sales
Bearish Case
Base Case
Bullish Case
1
7.00%
10.00%
11.00%
2
27.00%
30.00%
31.00%
3
41.00%
44.00%
45.00%
4
51.00%
54.00%
56.00%
5
59.00%
63.00%
64.00%
Based on earnings growth + valuation rerating, we can make a good CAGR.
Risks: More intense competition from Chinese on API side, plant not starting on time, valuations had gone to 0.3xMCAP/Sales in 2018-19 bear market.
Super weak Q4 performance. Profit took a major beating, down 48%. Mostly due to increased costs and looks like they have no pricing power. Chinese API players could be one of the primary drivers of this margin contraction. Revenues also declined. Overall, looks like a very bad Q4. Wonder how long this pain will last.
One should do independent diligence rather than blaming any person. I consider his views, but I act only when they align with my own conviction—otherwise, I simply move on, which happens about 8 out of 10 times. It’s important to listen to everyone but ultimately make your own decisions.
so as no oneupdated about q4 of the company here are my brief 2 cents
operational performance
API segment 97crs contributed by anti infectives,carbapenems,anti diabetics,nacrodiles,neuromodulators.
they exported to africa, middel east, southeast asia and UK.
their formulation segment part had total revenue of 72.2crin which penicillin part contributed to 44cr and non penicillin part 28.24, formulations were 100% export oriented. Q4 revenue and Q4 pat also declined. mainly due to softness of api exports and dependence on peniccillin part, as they import raw material from china so a volatility can be seen on that part.
key things to keep in mind are to keep a watch for that panoli api facility adn developing niche apis.
they are also talking about reducing dependencies on china for raw materials adn increasing automation in packaging lines.
now about the merger, as we all know they are getting into 14000cr diagnostics market which is at now growing at 14% cagr.
they will buy the machines from global OEMS and it will be placed at labs and hospitals under long term contracts of commiting to buy a fixed volume of reagents regularly from kopran.they have already deployed around 120 machines and they will add up 20 approx more every year which will cost around 7-8cr,they are paying the capex cost for their customers and making them get into a contract.
the revenue is heavily skewed to Q4 which leads to aggressive seasonality. they are again higly dependent on reagents so if the customers exit after 5year (avg contract term provided by company) thier revenues can go down a bit. and again on lab valuation its a bit on the high size of around 240cr which is kinda agressive, but they are peicing it for growth as they said in concall tha thier lab business sales 3xed in last 3-4 years,but they have not clearly mentioned net margin .but typically they are high ebitda business.
thier key customers are thyrocare,aiims ,tata hospitals, and mainly targeting tier 2-3 healthcares (B2B model currently,they may explore B2C).
kopran can leverage its manufacturing to assemble/repackage diagnstic kits they may see a margin upside if executed well.
This may finally bring some relief to Domestic manufacturers of 6 APA and Penicillin G Aclyse - key RMs used to make Penicillin based APIs and formulations
Should bring in relief for the likes of Koran Ltd who were reeling under the pressure of state backed Chinese aggression ( their usual toolkit to bankrupt competitors )
