Thanks Rohit . You covered the AGM very well. After the Agm , hasd a chance to spend a few minutes with one senior executive who shared following:
Some info on subsidiaries:
Next year(fy14) US subsidiary should report turnover of 15 m from current year 11m. This should be enough for US to break even
Brazil may take 2 more years to get there
From Chiarmans speech , felt that South Africa subsidiary maytake longer and has more of a âphysical presenceâ purpose rather than only revenue generetor.The goal here is patent protection and keeping /building the marketing arm of Unichem in SA.
With new drug policy, hit on bottomline for Unichem should be about 2-3% at EBIT levels.
Unichem has bought about 33% stake in SYNCHRONICS ( it is a CRO), not a subsidiary( sorry, no clue about this )
One things said by executive, that they expect gross margins to rmeain at 19% this year ( same as last year) . So basically new drug policy and any growth should strike out. BY next year , hopefully margins should get to 23%. ( in their best years few years ago , Unichem was at marins of 26%)
I think Chairman, directors realized they were probably lagging behind in same.
Rohit, it seems theyhighlighted some of the problems with Subsidaries.But do they have any concrete plans to fix those issues OR do they expect to have similar problems 2 years down the line. i thinkit can be key determinant on whether it is really so undervalued or not.
On Sales force front, do they currently lag industry in (sales force as % of revenue) and are trying to meet industry standardsOR are they saying that we will be much more agressive then the industry and thus achieve strong growth. Any ideas?
Added some qty at these levels , unless there is some hidden trouble brewing like a FDA import alert i feel downside shouldn’t be too much from these levels .
I read earlier at 180 when people didnt expect much downside and it was around 160-170 for a long time. Then there was a flat Q1 and stock fell down. Now with the general fall in market, the stock is at 145 or so.
Why do you feel that the downside shouldn’t be too much? I know about margin expansions and div yield. But in a market thats falling like crazy and even names like HDFC Bank are going down, why cant Unichem go down further. My personal experience is that I used to look at historic prices and had similar thoughts. But i had to pay for it Problem is that such thought process comes more out of our psychology.
It may be wiser to wait and watch and then buy when things improve and market starts moving up. You may miss the bottom by 5-10% but that should not matter alot.
I exited from my positions in this post-results at 165 when mgmt tried to support the price.
The story as of yet, is that, yes, there have been promises of turnaround yet but none that reflects in a big way in results.
Technically too chart has broken down from mid & long term triangle and next support comes at 128-130. In an overall weak mkt it can easily come to this level. And if you consider the fact this is happening despite mgmt buying, be ready for many others to throw in the towel for margin calls or to switchover to comparatively stronger names as they become cheap.
One thing I’ve learnt the hard way, is that when a long-supported price range breaks down, it doesn’t become cheap. It becomes even more costly to hold it. If you really love that co, more often than not mkt is going to give you a better price. I’ll wait for nxt quarter results to see whether I want to jump back in.
I’ve switched part of my Unichem by adding onto Kaveri & Polymed (now that’s a turnaround stock that one wants to own, super results yet price falling).
Some one who reads the thread sees that others were buying it at 160-170 levels with the so called conviction and then thinks 144 is a bargain. So I won’t blame someone who enters at these levels. The more active guys like you could get out at higher levels. I could not sell at those levels and now I am confused what to do with it. Unichem is around 10% of my portfolio
I went through thier website and found that they have a good portfolio of formulations. As Hitesh says,they all fall under specality medicine category.I liked theirfocus onmedicines related to cardialogy/nervous system, given thelifestyle the salaried class in India lead (and add to it the stress from falling stock market ! :)) .
We always feel thegrass is greener on the other side. In stock markets, if you have a good stock (maybe not great) like Unichemin your portfolio, its worthNOT holding a ‘maybe’ great XYZ stock .
I am fully convinced that I will make profit at some point of time but then you have other companies like Kaveri, PI, Repco (even IndusInd looks good at these valuations) that are growing at scorching rates and are now available at good prices because of the fall. So it would make sense to shift to those companies (provided they offer enough margin of safety) for a while and buy back Unichem later when the revenues pick up.
you are right , its quite possible that the stock could fall further given the extent of today’s fall and overall market sentiment.
i guess what iam implying here is that given my investment horizon of couple of years i dont see much downside risk to my invested capital if i accumulate around these levels . i stagger my purchases , so will be adding some more at every 10% fall. i find it difficult to predict tops/bottoms etc and just follow the simple principle to add stocks i like if they are down 10-20% in short span without any apparent change in fundamentals .
Promoter buying in Unichem is happeneing like as if there is no tomorrow.
Reg Kaveri/PI , I would avoid overallocation because I personally feel Seedsand anything related to agri is can be tinkered with by Govts wantingto make it look like a pro farmer,pro common man etc. I of course have no data points or factsto support myopinion . But this govt is just capaable of doing anything, and all it might take is just a single announcement in parliament by some ministerto set the negativity in.
This may not be the case for a CVC pipes, sanitary wares, tiles etc
Reg indusind , they give me lot of those pesky, telemarketing calls alomst everydaycompletely pissing me off . Its more than any bank does. It doesen’t give me a good feeling and so does the stock :).
Pathetic results. The bottomline couldnot cope up with increasing cost from all fronts. The saving grace was only the other income on proceeds from Mylan. Otherwise results would have looked worse.
Management had iterated stagnant growth in Q2. Uptick expected from Q3 onwards.
“…Going forward, talking about the full year, maybe Q3 and Q4 after this one-time structural adjustment takes place in Q2, Q3 and Q4 growth should definitely be better…”
Problem is that such thought process comes more out of our psychology.
