UNICHEM LABORATORIES LTD
The company is an integrated pharmaceutical company with strong presence in the domestic formulations segment. The company has presence in cardiology, anti infectives, orthopaedics, neurology and is now entering dermatology segment.
The company is ramping up its presence in the US markets with more and more ANDA filings and gets approvals for the same.
Cmp 104, market cap 950 crores. Debt as on Sep 11 was around 47 crores.
Book Value around 75.
Promoter holding is 49.25% with no pledging.
RECENT DEVELOPMENTS
1. Unichem has undertaken commissioning of new facilities in Baddi and Sikkim.
2. Commissioning of its SEZ in MP.
3. Company is increasing its sales force to augment domestic sales. This has led to higher expense and hence reduction of margins in the short term. However in the longer term this move is likely to pay good dividends.
All the above measures are likely to have full impact on companyâs growth from fy 13 onwards.
4. Higher concentration on tier II brands as further growth from its top brand like ampoxin looks difficult.
5. Change in its domestic distribution network, replacing the distributor system with its own C&F agents in line with the practice followed by other peer pharma companies. This has led to destocking of inventory at the distributor level which has led to reduced sales and profit momentum in the short term. This pain is likely to get over post fy 12.
6. The company had taken over Niche Generics in UK and made it a fully owned subsidiary in dec 06. This acquisition however has not yet started contributing to the top line and is making loss at the net level. The management is focussing on making it profitable.
FINANCIALS
Paid up equity is 18 crores with 9 crores shares outstanding, face value of each share being Rs 2.
Company paid a dividend of Rs 4 in fy 11.
Last few years results
Year |
07 |
08 |
09 |
10 |
11 |
H1fy12 |
Sales |
557 |
588 |
660 |
690 |
766 |
387 |
OP |
121 |
112 |
166 |
187 |
169 |
48 |
Int |
2.4 |
2 |
1.93 |
1.8 |
2 |
|
NP |
90 |
77 |
125 |
134 |
109 |
34 |
Half yearly eps for fy 12 (not annualised) is 3.85.
Last six quarter results
Qtr |
Jun 10 |
Sep 10 |
Dec 10 |
Mar 11 |
Jun 11 |
Sep 11 |
sales |
186 |
200 |
195 |
176 |
187 |
197 |
PBDT |
50 |
51 |
40 |
26 |
28 |
33 |
NP |
33 |
35 |
26 |
15 |
16 |
19 |
There has been steady improvement in the margins and sales figures since past 3 quarters and next few quarters need to be monitored.
INVESTMENT THEME
Investment in Unichem is based on investing in a near debt free company which is suffering a temporary glitch (in terms of reduced profitability) due to some initiatives taken by the management in order to ensure long term growth.
Promoter Dr Prakash Mody has been gradually increasing his stake through creeping acquisition from open markets.
Corporate office of the company is located on a land bank of 3.5 acres which alone could be valued at close to 500 crores. Though this offers valuation comfort, it should not be the reason for investment in the company.
The stock price has corrected from a high of 260 in dec 10 to the current price of 104 levels in line with declining performance.
If the steps initiated by the management to augment its domestic sales fructify , and expected ramp up from the US markets happens there could be significant upsides in the stock price from the current levels. And once the company gets its act together the stock price may go up inspite of markets going down or remaining at current levels. One needs to be patient in accumulating the stock at each fall. At cmp of around 104, I feel it offers good risk reward ratio for the patient investor.
TECHNICALS
At the recent low of around 102-103, the stock has lost exactly 61.8% from its all time high of 270 odd levels.
Unichem Looks like a low risk moderate return kind of investment bet in the current market conditions.
disc: accumulating at cmp and intend to add more on declines.