Here is my thesis about a closely tracked stock. I am looking for opinions if I am thinking in the right direction or not.
Kwality Pharmaceuticals Limited is an India-based holding company. The Company manufactures and exports pharmaceutical formulations in liquid orals, dry syrups, tablets, capsules, sterile powder for injections, small volume injectables, ointments, external preparations and oral rehydration solution (ORS)
While the Stock has run up from 100 rupees to 900 rupees according to the latest results:
Sales : 300 Crore
PAT : 94 Crore
I believe the remarkable performance by the company calls for a discussion.
Management has maintained it is able to repeat its first-half performance which means a PAT of FY PAT of 180cr+.
This translates into EPS of 180 and pe of 4.63 with an industry avg PE of 26 (Bulk Drugs).
Further 2 plants will get commissioned in next few months.
Company has also mentioned that due to Remdesivir and Propofol - it has gained a lot recognition in the international market and got PHARMACEUTICAL INSPECTION CO-OPERATION certificate.
According to even basic calculations, this stock deserves a PE rerating because of
Confidence in repeating the performance for the coming years.
Hope to get your view point on this situation.
Well, what changed was operating leverage kicked in and in times of uncertainty the company used its low cost of production and good quality products to gain global recognition - gain certifications - get its products registered and push its high margin products across new geographies.
In terms of sustainability well the company has guided for a strong order book and announced Capex for 2 new plants ( funded by earnings) - Pointing towards multifold growth.
would love to understand some anti thesis pointers as well if anyone has any.
40% market share of electroplating ind. In india
(Big fish in small pond)
=There is approval process with customers so it acts as natural entry barrier and customers dont change frequently
=Our strength is Quick service, Right price
3…Only company in india having complete solution provider for surface treatment industry having presence in chemical,paint and engineering division for surface treatment
=Despite mnc like atotech presence since few yrs,grauer has maintained its first position
=Has provided chemical n paint to isro mangalyan
=First indian company to receive certy for aerospace
=Rolce roy approval
=Boeing in process
=l n t
5… R N D
=Research and development is the backbone of our operations to meet the challenges of
new product oerings by competitors
=Our strong, dedicated, highly qualified and experienced talent pool of employees has brought many industry firsts to our credit.
=Greentechnologies and backward integration has been a key driver to our R&D roadmap. Our
R&D labs at Kandivli and Chembur have been duly recognised by prestigious Indian
Council of Science and Technology.
Suven pharma has highest operating margin in industry with main focus on new molecules.What i like about company is “Strong research and execution capability”
While laurus is mainly concentrated on anti viral and onco with not much diversification
…Kei has huge growth in last few yrs .Its retail business is growing over EPC and institutional business.This will bring down working capital
…While polycab has high growth but it is trading at higher PE ratio
=I will give 10 out of 10 to corporate governence for kpr mill.When i invested in kpr,i was in search of out of favour industry and textile was perfact industry at that time.
=There is no question of comparision with praj as 90% revenue of kpr is from textile and only 10% from ethanol.
1=I generally prefer companies with PE less than 25-30, preferrably <20 at the time of buy
2=I dont sell when PE ratio increases during investment journey.I will generally hold for 10 or more yrs(lets see ,i had started in 2017 and since 2017 i had not sold most stocks)
(Curtsey of book 100 baggers by crystopher mayer)
3=I prefer companies with mcap<5000