Highlights: Vivimed Labs
FY 07-12 CAGR: Sales: 32%, PAT: 31%
FY13E EPS : 70+ ( FY12: 40) . FY13E Sales: 1000Cr+ ( FY12: 668cr)
Pharma / speciality chemicals company supplying speciality ingredients to Beauty & Healthcare Companies like Unilever, Loreal etc in 50+ countries. Recession proof business with very high entry barriers about to break into 1000cr club, available at FY13 forward P/E of 5.
Supplier of speciality ingredients and performance enhancing chemicals for a wide variety of applications such as,oralcare, skincare, sun protection, anti-aging, haircare, photochromatics and pharmaceuticals. Products range from Triclosan in toothpaste, ZPTO in shampoo, UV-A,UV-B absorbers in sunscreen, NDGA in anti-ageing creams etc.
Strong relationships with global majors like Unilever, P&G, Johnson&Johnson, LâOreal, Novartis & AstraZeneca. Strong entry barriers in the business: It takes 5-7 years to break into a global majors like LâOreal or Unilever. Exports account for more than 50% of revenues.
Three acquisitions made recently in pharma. With focus on R&D, and 100+ scientists in it's fold, the company consistently strives to develop newer molecules in the niche segments like Osteoarthiritis, Antipsychotic, Dermitology and Oncology.
IPO in 2005 -raised $4m at Rs70/share. Earnings growth mainly on back of acquisitions made over the years. Placement also made to Kitara, Jacob Ballas and IFC but equity dilution much lower compared to growth in earnings. Vivimed does not plan to go for any more fundraising in the near future from Private Equity players or any other primary or secondary market avenues.
(1) The Company has envisaged a growth plan by focusing more on innovation led R&D products in specialty chemicals, thereby giving scope for margin expansion.
(2) Improvement in the working capital cycle is bound to happen gradually with credit period ranging between 90-100 days amongst various geographies.
(3) Vivimed hedges only 20-30% of its exports, thereby benefitting from rupee depreciation.
The management has re-iterated its revenue target of Rs1,000cr+ based on the Uquifa integration. Focus on IP and biotech related products (which ensures high gross margins of ~60-70%),
Specialty Chemicals: The specialty chemicals comprise 38% of the total sales and have grown by mere 2.6% yoy in 1QFY2013. The slowdown in growth is largely attributed to lower off-take from ISP alliance (as ISP got acquired by Ashland in August 2011). However, the management
seems confident of a pick-up in FY2013E through the ISP alliance, as the margins improved to 18.7% (up 400bp yoy).
Pharma: The revenues from pharma business sky-rocketed to Rs167.4cr in 1QFY2013 based on revenues from the acquired entities (namely, Uquifa, Klar Sehen and Octtantis Nobel).
capex plan of the company
1. SEZ at Srikakulam district, Andhra Pradesh, Investment: 120cr ETA: March 2014
2. Formulation dosage facility, Choutuppal, Investment: 40cr, ETA: June 2013
3. Expansion of existing manufacturing facilities at Bonthapally, Investment: 10cr, ETA: June 2012
4. Expansion of existing manufacturing facilities at Bidar, Karnataka, Investment: 10cr, ETA: June 2012
I think the stock is relatively under researched. I do have research reports from Nirmal Bang ( holds nearly 5% stake) with a target of 650 and Reliance Securities with a target of 575 ( CMP 365). In fact out of 45% public holding, about 30% is in strong hands. With the 1000cr sales it will attract a lot more attention. I think it gets the valuation of a regular chemeical company but the quality of business is much different. Earlier, most of the sales were from Chemicals division but going forward, both pharma and chemical will be same. Net EBIDTA margin is 20%, PAT margin 9%
The website of the comapny is great and you can find invester presentations etc http://www.vivimedlabs.com/news/category/investors/investor-presentations/
Management Interview: http://www.indiainfoline.com/Research/LeaderSpeak/Santosh-Varalwar-CEO-and-Managing-Director-Vivimed-Labs-Ltd/32531191
Not filling in too many details here. I am hardly the guy who can pick holes in balance sheets or can 'see through' companies as some magicians in this forum do, so need the advise of seniors.
|Reported Profit After Tax||63||49||31||19||16||14||9|
|Adjusted Profit After Extra-ordinary item||63.1||48.8||31||19.4||16||13.6||9.3|
|EPS (Unit Curr.)||45.3||48||31.1||20.6||17||14.4||12.8|
|Non-Promoter Holding (%)||54.9||49.7||44.6||41.5||41.2||41.2||47.3|