[quote="Donald, post:1, topic:62331050"]
> Ayush made a fantastic call on Shilpa, and still remains very very bullish.
>
> In this stock story he has tried to bring out exactly why. I never got around to taking his suggestion seriously to dig into Shilpa Its never too late to make amends.
>
> I want to understand first the competitive space around onclology APIs. Whats so special about Shilpa? Arent there others in the Oncology API space like Dabur Pharma/ Why are pharma majors not in this game? Why are Chinese API suppliers not able to match up??
[/quote]
Hello everybody
this is Sat, I go by the name excel_monkey on theequitydesk.com
Thanks Hitesh bhai for introducing me with this wonderful forum (I came across this site via your blog)
Shipla's growth has been really fantastic but Ibelievethat API companies carry a greater amount of risk ascomparedto formulations companies and therefore I would prefer the likes of Venus Remedies in this space
The company has greater number of products ascomparedto Shilpa
Geographicallythe company is more diversified
formulations generally require greater investment and have longer gestation period but are more stable (R&D and registration spend is greater, for Venus it is 50 cr per annum)
Valuation:
the stock is quoting at a P/E of 5, itstop lineand bottom line has grown by more than 3 times in last 5 years.
Sonata investments is a major corporate invested in Venus. The company has won several awards.
Negatives:
The company had willfully defaulted on its FCCB though the issue has been settled between the company and FCCB holders the issue remains an overhang on the stock
the growth has slowed down as well as the margins have come down slightly but considering the nature of formulations business they should keep adding to the top line albeit at a slower pace.
some excerpts from a broker research report:
http://www.moneycontrol.com/news_html_files/news_attachment/2010/VenusRemedies.pdf Link: http://www.moneycontrol.com/news_html_files/news_attachment/2010/VenusRemedies.pdf
Business Details
Venus Remedies Ltd. is a research and development driven pharmaceuticalmanufacturing company incorporated on 15th Sept, 1989 as a privatelimited company by the name of Venus Glucose Pvt Ltd, and subsequently converted into a public limited company on 19th Sept. 1994 and thename was converted as Venus Remedies Ltd. Venus Remedies is a majorproducer of oncological and cephalosporine injectable products. Thecompany has three manufacturing locations, two in India and one in Germany.
Venus is top class manufacturer of Oncological and CefelosporineInjectable products following EU-GMP norms for all is activities.The company has de-risked its business model by having presence in thehigh growth therapeutic segments such as anti-infective, oncology, cardiologyand neurology. Its research team has proved itself to be a powerhouse of innovation by filing many international patents for sophisticatedformulations and are constantly working to broaden the pipeline of productsand to make an impact in the international markets.
The Company is having a strong marketing team. Its field marketing personnel,Unit III, has a strong people-oriented approach, round the clockopen communication channels, strong customer relations, prompt supplychain, use of custom-made IT software, automation tools to facilitate informeddecision making to strengthen its marketing. The internationaldepartment comprised three segments that oversaw business in Asia,Africa, CIS, Europe, the Middle East, and the US. The department's qualifiedand experienced team ensured an active presence across 20 countrieswith a total global presence in 60 countries, exporting 50 products for thedemanding anti-cancer, anti-infective and cardiovascular segments.
Investment Rationale
Venus Remedies has marked its presence in the region of Australasiaby receiving a patent from Commissioner of Patents, Trademarks& Design, Intellectual Property office of New Zealand for itsantibiotic Potentox, a fixed dose combination of cefepime and amikacin.New Zealand is the fourth country after South Korea, Indiaand South Africa from where Venus Remedies has got patent forPotentox, This patent will give Venus Remedies exclusive marketingrights in New Zealand. Post registration in New Zealand market,it expects to generate handsome revenues from this productwhich will add to growth in top line and bottom line of the company.
Venus Remedies has tied-up with IMTECH a renowned ResearchCenter of the Council of Scientific and Industrial Research (CSIR)and Department of Microbiology Panjab University to jointlydevelop a diagnostic kit for typhoid. The kit is expected to bringdown the detection time of the disease from 48 hours (fromconventional Vidal test) to just few minutes. The kit is expected tobe out in the market by 2013. The project has got a lot of social importanceattached to it as world over typhoid affects roughly 17 millionpeople annually. For the project, Venus Medicine ResearchCenter (VMRC), the research arm of Venus Remedies, has signedmemorandum of understanding with Institute of Microbial Technology.
Venus Remedies is planning to foray into the European drug marketwith its innovative generic injectables and cancer drugs. The companyhas lined up close to 25 products for launch in about 15 Europeancountries, including the launch of four drugs in few months.These drugs have a market potential worth over 400 million Euros.Venus plans to manufacture the basic products in India and convertthose to finished products at its acquired facility in Germany, forlaunch of different European markets.
Venus Remedies spend close to Rs.50 crores on Research & Developmentand planning to invest similar amount of money in everyyear for next five year time which leads it to become a power houseof innovation by filing many international patents and are constantlyworking to broaden the pipeline of products. Venus Remedies isall set to launch the world's first once-a-day painkiller injectable inthe country. The product Aceclofenac OD has just bagged a patentfrom the Indian Patent office, aims a 10 per cent market share in thesegment with this product. The company had recently launchedMebatic, a unique antibiotic combination in infusion form to curesevere gastro intestinal (GI) infections.
Valuation
valuations have come down since the report was written
The company has posted significant growth in its sales duringQ4FY10. Venus is continuously focusing its research and developmentactivity which brings strength to strong manufacturing base forspecialised products. Revenue Generation and increased profit hascontinued apace due to launch of innovative products in India andother international geographies. Venus is also looking for contractmanufacturing services for that it has filed many international patents.
Further the stock is trading at a very low PE multiple.Presently, the stock is trading at Rs 276.10 which is at 5.11 times toits earnings and 1.63 times to its book value of Rs 169.07. Since thestock offers good opportunity, we initiate a âBUYâ signal on the stockwith a target price of Rs 360.00 in medium to long term investmenthorizon expecting an appreciation of about 30% from the current levelof Rs 276.10.
Numbers from moneycontrol:
| Profit & Loss account |
in Rs. Cr.
|
| Mar '06 | Mar '07 | Mar '08 | Mar '09 | Mar '10 |
 |
| 12 mths | 12 mths | 12 mths | 12 mths | 12 mths |
|
| Income | | | | |
| Sales Turnover | 92.07 | 141.22 | 213.60 | 264.51 | 311.93 |
| Excise Duty | 7.13 | 0.98 | 0.90 | 0.42 | 0.42 |
| Net Sales | 84.94 | 140.24 | 212.70 | 264.09 | 311.51 |
| Other Income | 0.07 | 3.53 | 1.83 | -0.67 | -0.43 |
| Stock Adjustments | 4.23 | 1.99 | 4.81 | 8.22 | 6.19 |
| Total Income | 89.24 | 145.76 | 219.34 | 271.64 | 317.27 |
| Expenditure | | | | |
| Raw Materials | 59.36 | 89.29 | 134.15 | 167.39 | 189.13 |
| Power & Fuel Cost | 0.62 | 0.77 | 1.53 | 1.57 | 1.64 |
| Employee Cost | 2.83 | 6.17 | 9.19 | 11.60 | 15.56 |
| Other Manufacturing Expenses | 0.30 | 0.35 | 0.63 | 1.03 | 1.35 |
| Selling and Admin Expenses | 3.63 | 8.00 | 14.83 | 22.34 | 30.61 |
| Miscellaneous Expenses | 0.49 | 0.73 | 2.45 | 4.20 | 3.65 |
| Preoperative Exp Capitalised | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total Expenses | 67.23 | 105.31 | 162.78 | 208.13 | 241.94 |
| Mar '06 | Mar '07 | Mar '08 | Mar '09 | Mar '10 |
|
| 12 mths | 12 mths | 12 mths | 12 mths | 12 mths |
|
| Operating Profit | 21.94 | 36.92 | 54.73 | 64.18 | 75.76 |
| PBDIT | 22.01 | 40.45 | 56.56 | 63.51 | 75.33 |
| Interest | 1.93 | 2.79 | 4.76 | 8.42 | 13.41 |
| PBDT | 20.08 | 37.66 | 51.80 | 55.09 | 61.92 |
| Depreciation | 0.92 | 2.15 | 4.28 | 4.43 | 11.69 |
| Other Written Off | 0.75 | 2.01 | 1.47 | 1.41 | 1.27 |
| Profit Before Tax | 18.41 | 33.50 | 46.05 | 49.25 | 48.96 |
| Extra-ordinary items | -0.01 | -0.11 | 0.00 | 0.00 | 0.00 |
| PBT (Post Extra-ord Items) | 18.40 | 33.39 | 46.05 | 49.25 | 48.96 |
| Tax | 2.18 | 4.67 | 7.52 | 3.73 | 7.90 |
| Reported Net Profit | 16.23 | 28.74 | 38.52 | 45.53 | 41.05 |
| Total Value Addition | 7.87 | 16.02 | 28.63 | 40.74 | 52.81 |
| Preference Dividend | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Equity Dividend | 1.68 | 2.52 | 3.38 | 2.54 | 2.54 |
| Corporate Dividend Tax | 0.23 | 0.43 | 0.57 | 0.43 | 0.43 |
| Per share data (annualised) | | | | |
| Shares in issue (lakhs) | 84.07 | 84.07 | 84.53 | 84.53 | 84.73 |
| Earning Per Share (Rs) | 19.30 | 34.19 | 45.56 | 53.86 | 48.45 |
| Equity Dividend (%) | 20.00 | 30.00 | 40.00 | 30.00 | 30.00 |
| Book Value (Rs) | 38.00 | 69.61 | 110.65 | 169.38 | 212.37 |
| |
|
|
| Quarterly Results |
in Rs. Cr.
|
|
|
| Sep '09 | Dec '09 | Mar '10 | Jun '10 | Sep '10 |
|
| Sales Turnover | 74.86 | 76.48 | 80.78 | 82.17 | 85.75 |
| Other Income | 0.76 | 1.19 | 0.38 | 0.02 | 0.06 |
| Total Income | 75.62 | 77.67 | 81.16 | 82.18 | 85.81 |
| Total Expenses | 58.29 | 60.10 | 62.22 | 63.20 | 63.91 |
| Operating Profit | 16.57 | 16.38 | 18.56 | 18.97 | 21.84 |
| Profit On Sale Of Assets | -- | -- | -- | -- | -- |
| Profit On Sale Of Investments | -- | -- | -- | -- | -- |
| Gain/Loss On Foreign Exchange | -- | -- | -- | -- | -- |
| VRS Adjustment | -- | -- | -- | -- | -- |
| Other Extraordinary Income/Expenses | -- | -- | -- | -- | -- |
| Total Extraordinary Income/Expenses | -- | -- | -- | -- | -- |
| Tax On Extraordinary Items | -- | -- | -- | -- | -- |
| Net Extra Ordinary Income/Expenses | -- | -- | -- | -- | -- |
| Gross Profit | 17.33 | 17.57 | 18.94 | 18.99 | 21.90 |
| Interest | 2.11 | 2.42 | 3.00 | 3.36 | 5.11 |
| PBDT | 15.22 | 15.15 | 15.95 | 15.62 | 16.79 |
| Depreciation | 1.97 | 1.97 | 0.59 | 1.97 | 2.34 |
| Depreciation On Revaluation Of Assets | -- | -- | -- | -- | -- |
| PBT | 13.25 | 13.18 | 15.36 | 13.65 | 14.45 |
| Tax | 2.25 | 2.24 | 2.61 | 2.72 | 2.88 |
| Net Profit | 11.00 | 10.94 | 12.75 | 10.93 | 11.57 |
| Prior Years Income/Expenses | -- | -- | -- | -- | -- |
| Depreciation for Previous Years Written Back/ Provided | -- | -- | -- | -- | -- |
| Dividend | -- | -- | -- | -- | -- |
| Dividend Tax | -- | -- | -- | -- | -- |
| Dividend (%) | -- | -- | -- | -- | -- |
| Earnings Per Share | 12.99 | 12.91 | 15.05 | 12.87 | 13.62 |
| Book Value | -- | -- | -- | -- | -- |
| Equity | 8.47 | 8.47 | 8.47 | 8.49 | 8.49 |
| Reserves | -- | -- | -- | -- | -- |
| Face Value | 10.00 | 10.00 | 10.00 | 10.00 | 10.00 |
| |
|
| Key Financial Ratios |
in Rs. Cr.
|
|
|
| Mar '06 | Mar '07 | Mar '08 | Mar '09 | Mar '10 |
|
| Investment Valuation Ratios | | | | |
| Face Value | 10.00 | 10.00 | 10.00 | 10.00 | 10.00 |
| Dividend Per Share | 2.00 | 3.00 | 4.00 | 3.00 | 3.00 |
| Operating Profit Per Share (Rs) | 26.10 | 43.91 | 64.73 | 75.94 | 89.40 |
| Net Operating Profit Per Share (Rs) | 101.04 | 166.81 | 251.61 | 312.41 | 367.63 |
| Free Reserves Per Share (Rs) | 22.14 | 51.79 | 94.13 | 154.33 | 198.62 |
| Bonus in Equity Capital | -- | -- | -- | -- | -- |
| Profitability Ratios | | | | |
| Operating Profit Margin(%) | 25.83 | 26.32 | 25.72 | 24.30 | 24.31 |
| Profit Before Interest And Tax Margin(%) | 24.73 | 24.18 | 23.51 | 22.60 | 20.55 |
| Gross Profit Margin(%) | 23.95 | 26.56 | 23.71 | 22.62 | 20.56 |
| Cash Profit Margin(%) | 20.16 | 21.48 | 20.63 | 19.78 | 17.50 |
| Adjusted Cash Margin(%) | 21.06 | 22.94 | 20.63 | 19.78 | 17.50 |
| Net Profit Margin(%) | 19.08 | 19.99 | 17.95 | 17.22 | 13.17 |
| Adjusted Net Profit Margin(%) | 19.09 | 20.05 | 17.95 | 17.22 | 13.17 |
| Return On Capital Employed(%) | 38.01 | 25.28 | 26.84 | 21.32 | 19.10 |
| Return On Net Worth(%) | 50.78 | 49.09 | 42.89 | 32.32 | 22.94 |
| Adjusted Return on Net Worth(%) | 58.89 | 54.08 | 42.90 | 32.97 | 23.25 |
| Return on Assets Excluding Revaluations | 26.05 | 63.40 | 106.21 | 166.61 | 211.11 |
| Return on Assets Including Revaluations | 26.05 | 63.40 | 106.21 | 166.61 | 211.11 |
| Return on Long Term Funds(%) | 48.97 | 27.71 | 31.09 | 25.15 | 23.10 |
| Liquidity And Solvency Ratios | | | | |
| Current Ratio | 0.79 | 0.94 | 0.85 | 0.93 | 0.84 |
| Quick Ratio | 1.34 | 1.30 | 1.56 | 2.34 | 1.99 |
| Debt Equity Ratio | 0.68 | 1.45 | 1.02 | 0.92 | 0.83 |
| Long Term Debt Equity Ratio | 0.30 | 1.24 | 0.75 | 0.63 | 0.51 |
| Debt Coverage Ratios | | | | |
| Interest Cover | 12.28 | 16.08 | 12.25 | 7.68 | 5.01 |
| Total Debt to Owners Fund | 0.68 | 1.45 | 1.02 | 0.92 | 0.83 |
| Financial Charges Coverage Ratio | 11.40 | 14.49 | 11.88 | 7.65 | 5.66 |
| Financial Charges Coverage Ratio Post Tax | 10.26 | 12.78 | 10.30 | 7.10 | 5.03 |
| Management Efficiency Ratios | | | | |
| Inventory Turnover Ratio | 5.96 | 7.95 | 7.78 | 5.98 | 5.06 |
| Debtors Turnover Ratio | 14.55 | 16.55 | 16.44 | 11.14 | 9.91 |
| Investments Turnover Ratio | 6.60 | 7.94 | 7.78 | 5.98 | 5.06 |
| Fixed Assets Turnover Ratio | 4.29 | 2.43 | 1.74 | 1.84 | 1.30 |
| Total Assets Turnover Ratio | 1.59 | 1.02 | 1.18 | 1.14 | 0.95 |
| Asset Turnover Ratio | 2.94 | 2.70 | 1.74 | 1.84 | 1.30 |
| | | | | |
| Average Raw Material Holding | 40.40 | 35.00 | 40.46 | 55.59 | 77.39 |
| Average Finished Goods Held | 24.08 | 19.50 | 16.46 | 22.37 | 24.68 |
| Number of Days In Working Capital | 73.16 | 58.34 | 68.30 | 104.47 | 106.09 |
| Profit & Loss Account Ratios | | | | |
| Material Cost Composition | 69.87 | 63.67 | 63.07 | 63.38 | 60.71 |
| Imported Composition of Raw Materials Consumed | -- | -- | -- | -- | -- |
| Selling Distribution Cost Composition | 1.43 | 1.96 | 2.85 | 3.57 | 4.26 |
| Expenses as Composition of Total Sales | -- | -- | -- | -- | -- |
| Cash Flow Indicator Ratios | | | | |
| Dividend Payout Ratio Net Profit | 11.79 | 10.26 | 10.27 | 6.51 | 7.24 |
| Dividend Payout Ratio Cash Profit | 10.69 | 8.96 | 8.93 | 5.77 | 5.50 |
| Earning Retention Ratio | 88.22 | 89.77 | 89.74 | 93.62 | 92.86 |
| Cash Earning Retention Ratio | 89.32 | 91.06 | 91.07 | 94.33 | 94.55 |
| AdjustedCash Flow Times | 1.21 | 2.58 | 2.16 | 2.52 | 2.74 |
|
|
| Mar '06 | Mar '07 | Mar '08 | Mar '09 | Mar '10 |
|
| Earnings Per Share | 19.30 | 34.19 | 45.56 | 53.86 | 48.45 |
| Book Value | 38.00 | 69.61 | 110.65 | 169.38 | 212.37 |
|
on the
Shilpa Medicare Link: ../../../../company/shilpa-medicare/stock-story seriously
.
