Sequent Scientific - Indian story in Global Animal Pharma Space

My take on the valuation is, since SeQuent is now held by a PE now & most likely will be sold off to another promoter completely (like in Eggplant) or partially (like in SBI cards) in few years when they have made many more multiple times on their investments (currently they are at ~3X). If this gets sold to a MNC the high valuation will very likely sustain.

I doubt that we will able to see extreme downward re-rating anytime soon as they run a very tight ship (see SBI card’s last years’ performance even in face of COVID meltdown, Earnings have halved and GNPAs have doubled till last Qrtr, yet to see 500 Levels again) and any deep corrections in future would be happily bought into as fast, assuming the business keeps preforming as planned, enjoying the tailwind of the animal Pharma sector which could be a multi-year story in itself.

I am quite certain that it can stay over-valued for a long time or correct briefly to a fairer valuation in line with MNC FMCG/pharma valuation (read 40-50 PE band). From the current level where everthing already seems prices in, the growth in value would be in line with how fast the business keeps growing which could be decent given all the positive triggers they have.

I had held Sequent since 70 levels and cashed out 75% of my holdings around 240 levels due to the 3X run up in 10 months last FY and since then waiting for a deep correction. I do not have enough conviction to average up at 3X and I wait to be proved wronged in my above theory by the market so that I can again go back to a significant holding % of my PF in SeQuent.

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