Mangalam Drugs & Organics Ltd has informed BSE regarding “Intimation of Credit Ratings assigned”.
Fitch Group, India has upgraded, revised & reaffirmed the ratings of Mangalam Drugs & Organics Ltd.
Fund based facilities - IND BBB/Stable/IND A3+ (upgraded from CARE BBB-)
Non-Fund based facilities - IND A3+ (Upgraded from CARE A3)
Term Loan - IND BBB/Stable (Upgraded from CARE BBB-)
Positive news for the company and now HNI’s and Mutual Fund Houses attraction will be visible in the coming days.
Mangalam Drugs : Q2 FY16 Numbers
Net profit at 5.83 cr vs 3.65 cr; yoy increase of 59.72%
Net profit at 5.83 cr vs 5.10 cr; qoq increase of 14.30%
Sales at 76.43 cr vs 74.37 cr; increase of 2.76% yoy
Sales at 76.43 cr vs 67.94 cr; increase of 12.5% qoq
EPS at 3.69 from 2.77; yoy
Annualised diluted EPS of 12.81. Trading at PE of 12.6
Cash and cash equivalents : 0.93 cr
Sales to pick up in Q3 & Q4.
Please note the Net profit is excluding 1. HIV API 2. VAPI Plant product which has same capicity of existing plant.
And with US Election done and over; WHO approvals which are in the pipeline and new VAPI plant production which will boost top line as well as bottom line !!!
Also new HIV API will open the doors for new market. And lastly the pending order books will add future growth for the company.
Speaking to CNBC-TV18 Govardhan Dhoot, MD, Mangalam Drugs , said that margins have improved. Revenue growth is on track and it is looking at Rs 300 crore of revenue by end of FY17. We are Hoping for a 10-15 percent growth, he said. “We are focussing on the topline.”
“We are in sync with revenue because of better yields bad realisations and strong purchasing power.”
Mangalam Drugs’ Vapi (Unit-2) plant’s expansion and modernization has been successfully completed in August.
The company has also commenced the trial operations at the expanded Unit-2 at Vapi from Aug. 2016 end.
Also the total cost of the expansion is Rs. 30 Cr. And company also announced that this project was completed in record time.
Products:
The plant will produce API’s for Malaria and ARV’s.
Company also said that it will file for WHO approval all the products manufactured in Vapi (Unit-2).
Also company has plans to file DMF’s of certain API’s with USFDA.
Should keep an eye for next 2-3 quarters how revenues are moving in the upside with Vapi plant (Unit-2) being functional.
APIs Manufacturing Capacity: 720 TPA
Total Production area: 3272 Sq. m
2 API manufacturing and 1 solvent recovery block
Vapi - Unit 2 (WHO Approval - pending)
Manufacturing capacity: APIs 360 TPA and Intermediates : 1,000 TPA
Total Production area: 3059 Sq. m
Total 1 API manufacturing, 1 intermediate manufacturing, 1 pilot plant & 1 recovery blocks
Yes, expanded Unit-2 capacity has commenced operations. Trial operations at Unit-2 plant was started during Aug end. And they have filed Drug Master File (DMF) for all its product with World Health Organization (WHO).
Unit-2 plant is involved in active pharmaceutical ingredients (API) for Malaria and Anti-retroviral drugs.
It also plans to file DMF’s of certain API’s with United States Food & Drug Administration (USFDA) in the due course of time.
The stock has given technical indication of bottoming out on the charts and has finally signaled trend reversal. Also, on the fundamental side the stock is looking cheap and given its relatively insulated from any US rhetoric, it seems an interesting bet.
Unit-2 was recently audited by WHO- Geneva and we have been issued few procedural observations. Further the Company shall respond to the same within stipulated time after the receipt of Audit Report. The Company believe that the audit was successful.
today this is a low margin api player.i think moving up the value chain etc is some(many) years away (if at all ) .so while the new plant is a plus the concern seems to be low margins due to this being just an api player which is not expected to change in next 2-3 years i think.So will have to watch.
Excerpt from a blog courtesy ride2rich - concern on promoter in concert with operators ?
CONCERNS
Revenue concentration: The company’s future prospects are directly co-related with the extent of funds being spent by global agencies like WHO and various other foundations. Any reduction in allocation of these funds could impact Mangalam’s prospects. Further, Ajanta Pharma is the biggest client constituting 36% of sales followed by Cipla at 20%. Any adverse ruling by regulatory authorities towards these two formulation players’ business in Africa, would have a direct bearing on the performance of Mangalam Drugs.
Entry of newer players in Anti Malarial APIs : Although currently there are only two players (other being IPCA) manufacturing Anti Malarial APIs as per the requirements of WHO, new players could enter the market and increase the competitive intensity for Mangalam Drugs.
Pledging of promoter shares: The promoters have pledged 50.4% of their shareholding (total promoter stake in the company at 50.8%)
VALUATIONS & VIEW
Mangalam Drugs is expected to grow at 15% in FY17E and at a much higher pace in FY18E with the commencement of Unit 2 (subject to it receiving WHO pre-qualification within the current year). The stock trades at 13.6x TTM EPS.
We believe this leaves sufficient margin of safety considering the company’s stable positioning in Anti Malarial APIs and future growth drivers in Anti HIV APIs.
However the main investment concern is not really in the growth prospect, it is somewhere else. While meeting us and while asked about the sharp rise and fall of stock price he kept silent on it and tried to pass the topic. Operators play?
Secondly promoters issued warrants to themselves at Rs. 67 in Sep 2015 and converted the same pocketing cool 20cr in very short period of time. This is not a good sign too.
So, given the earning visibility and the doubts as described above, we have decided to keep this company in our close watch for future investment possibilities.
With ~15% revenue CAGR in FY17-19E, valuations are at 8.9x FY18E EPS of 17.6 and 7.3x FY19E EPS of 21.3
Besides anti-malarials, the company is looking to target other segments for WHO tenders like ARV, anti-TB, Hepatitis-C, etc. It has recently forayed into the ARV API segment, which currently contributes 3-4% to revenues.
The management expects contribution from this segment to increase to 30- 35% in the next two or three years.
Company also diversifying into other communicable disease WHO tenders besides anti-malarials. The additional capacity is already in place to support new segments. The management has guided for 500 crore revenues by FY19 (>30% CAGR in FY17-19E) mainly on the back of ARV API traction and 10-15% volumes growth in anti-malarial APIs.
