“management’s indifference and shareholder negligence both worked on Warren’s behalf, for the fewer folks came to the show, the more valuable would be whatever knowledge he could wrest from the company.” – from The Snowball where WB talks on the importance of attending AGMs
There is a lot of fear in the markets and several stocks in the mid and small cap space are having a free fall. These are the great times to focus and research more on the companies to find undervalued gems.
Last month, we toured South India to attend a few AGMs. We visited Avanti Feeds, Shilpa Medicare and Swelect Energy. The meetings were good and the companies seem well placed. It is often concerning to watch a few shareholders holding nominal quantities and coming over for free gifts and snacks. Despite good arrangements and the good work by the management, these shareholders often sabotage the proceedings. We need to fix this, otherwise the promoters will never treat the minorities properly. Probably having a video conferencing of AGMs may help.
Brief updates from above meetings:
Avanti Feeds: We have discussed the company many times in past and the stock has performed well too. The industry continues to see high growth rates of 30%+ since the adoption of the new shrimp specie – Vannamei. The company is superbly placed in its sector (due to the support of TUF) and ranks among the top. The management seemed quite honest, hard working and conservative. They were one of the first to understand the potential of the Vannamei specie in India and took various steps to get it introduced. The company has grown from a turnover of just 100 Cr in 2009 to 650 Cr in 2013. Avanti seems well placed as the industry is expected to remain on a good growth path for the next few years. Continue reading Updates from quarterly results and AGMs
The third quarter of the financial year 2013 has generally been very weak. The common problem has been the demand slowdown and the pressure on margins due to inflation and competition. In most of the cases results have been below expectations. On the positive side, these challenging times are the best times to re-structure your portfolio. One gets to accumulate high quality ideas at low valuations, (often) due to temporary problems. The important thing is to maintain liquidity and discipline.
Starting off with the good results:
Ajanta Pharma: The company posted stellar results and the stock witnessed a strong activity and appreciation. We discussed about the company here.
The company has posted a 37% growth in the topline from 164 Cr to 225 Cr and 75% growth in the net profits from 18.50 Cr to 32.57 Cr. The results are remarkable as the growth in profits has persisted despite higher taxation. Usually 4th quarter is the best quarter for the company, hence the company may be able to repeat similar performance in Q4FY13 too. We feel investors can continue to hold and try to buy on sharp declines, if any. Continue reading Update on Quarterly Results
We earlier talked about some developing ideas for 2013. This post is to discuss them in more detail.
Caplin Point (BSE: 524742)
This seems to be a very interesting pharma company at an early growth stage. We have been tracking it for some years but it really caught our interest when we received its FY12 annual report few months back. Few snapshots:
The interesting thing was that the company’s topline had grown by almost 35% in 2012, and yet the efficiency improved. The inventory and debtors remained at very low levels, debt reduced and the cash on balance sheet increased. The company has been getting efficient over the last few years: Continue reading Caplin Point & Poddar Pigments
Ajanta Pharma ranks among the Top 50 Pharmaceutical companies in India (IMS ORG MAT March 2012) with sales growing at 27% CAGR over FY06-12.
Link to company financials – http://www.screener.in/company/?q=532331
Main Generic Brands:
- Ophthalmology (Olopat, Diflucor, Zaha, Unibrom, Nepaflam)
- Dermatology (Melacare, Pacroma, Salicia KT, Sunstop)
- Cardiology (Atorfit CV, Met XL, Rosufit)
- Anti-Malarials (Artefan – Artemether & Lumefentrine)
- Gastroenterology (Lafutax – Lafutidine)
- Male Erectile Dysfunction (Kamagra – Sildenafil Citrate)
In the Dermatology segment, the company ranks 18th and has 34 generic brands – with 4 leading brands and more than 10 first-time products. In the Opthalmalogy segment, the company is ranked 7th and has 30 generic brands – with 9 leading brands and more than 16 first-time products in India. In the Cardiology segment, the company ranks 31st and has 51 generic brands – with 3 leading brands and more than 6 first-time products in India.
Over last 3 years, things seem to have really changed for the company. Ajanta is growing at about 25% CAGR now and at the same time its improving its operating margins, reducing loans and bringing working capital efficiency. Hence the ROE has improved from about 15-16% in earlier years to about 24% in 2012. The markets have noticed the same and the stock has been re-rated from usual 5-7 times PE multiples to about 10 now. However, we feel that given the strong branded formulation play and good rankings in several segments, the stock is available at a reasonable valuation considering the high multiples enjoyed by the pharma sector (Industry PE 26).
Continue reading Ajanta Pharma and MPS Ltd